<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
PEOPLES ENERGY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE>
[LOGO]
Notice of Annual Meeting of
Shareholders
and Proxy Statement
February 26, 1999 at 11:00 a.m.
Harris Trust and Savings Bank
Eighth Floor - Auditorium
115 S. LaSalle Street
Chicago, Illinois
<PAGE>
PEOPLES ENERGY CORPORATION - 130 East Randolph Drive - Chicago, Illinois 60601
RICHARD E. TERRY
Chairman of the Board
December 30, 1998
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Peoples Energy Corporation, to be held on Friday, February 26, 1999. The meeting
will begin at 11:00 a.m. in the auditorium on the eighth floor of Harris Trust
and Savings Bank, located at 115 S. LaSalle Street, Chicago, Illinois.
It is important that your shares be represented at this meeting. Therefore,
whether or not you plan to attend, please sign the enclosed proxy and return it
promptly in the envelope provided. If you attend the meeting, you may, at your
discretion, withdraw your proxy and vote in person.
If you plan to attend the meeting, please save the admission ticket that is
attached to your proxy and present it at the door.
Let me again urge you to return your proxy at your earliest convenience.
Sincerely,
/s/ Richard E. Terry
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 26, 1999
The regular Annual Meeting of Shareholders of PEOPLES ENERGY CORPORATION
will be held in the auditorium on the eighth floor of Harris Trust and Savings
Bank, located at 115 S. LaSalle Street, Chicago, Illinois, at 11:00 a.m. on
Friday, February 26, 1999, for the following purposes:
1. To elect directors of Peoples Energy Corporation.
2. To ratify the appointment of independent public accountants.
3. To act upon such other matters as may properly come before the meeting.
All shareholders, whether or not they expect to be present at the meeting,
are requested to sign, date, and mail the accompanying proxy in the envelope
enclosed with this Notice. Shareholders who are present at the meeting may
withdraw their proxies and vote in person.
If you plan to attend the meeting, please save the admission ticket that is
attached to your proxy and present it at the door. Attendance at the meeting
will be limited to shareholders of record as of the record date and their guests
or their authorized representatives, not to exceed two per shareholder, and to
guests of the Company.
Shareholders of record as of December 28, 1998, will be entitled to vote at
the meeting and at any adjournment thereof.
PETER KAUFFMAN
Secretary
Chicago, Illinois
December 30, 1998
<PAGE>
PEOPLES ENERGY CORPORATION - 130 East Randolph Drive - Chicago, Illinois 60601
December 30, 1998
PROXY STATEMENT
This Proxy Statement is being mailed to shareholders on or about December
30, 1998, in connection with the solicitation of proxies on behalf of the Board
of Directors of Peoples Energy Corporation (the Company), to be voted at the
Annual Meeting of Shareholders of the Company. The meeting will be held at 11:00
a.m. on Friday, February 26, 1999, in the auditorium on the eighth floor of
Harris Trust and Savings Bank, located at 115 S. LaSalle Street, Chicago,
Illinois. The shares represented by the proxies received are to be voted in
accordance with the specifications contained in the proxy. Proxies are revocable
at any time prior to use.
The Company has borne the cost of preparing, assembling, and mailing this
proxy soliciting material. In addition to solicitation by mail, there may be
incidental personal solicitations made by directors, officers, and regular
employees of the Company. The cost of solicitation, including payments to
brokers, nominees, or fiduciaries who mail such material to their clients, will
be borne by the Company.
The Company has retained Corporate Investor Communications, Inc., 111
Commerce Road, Carlstadt, New Jersey, to assist with the solicitation of proxies
from certain shareholders, for which services Corporate Investor Communications
will receive a fee that is expected to be about $6,500, plus reimbursement for
certain expenses.
OUTSTANDING VOTING SECURITIES
Only holders of common shares of record as of December 28, 1998, are
entitled to vote at the meeting or any adjournment thereof. As of December 28,
1998, there were outstanding 35,480,372 shares of common stock of the Company.
The Annual Report of the Company for the fiscal year ended September 30,
1998, including financial statements, is being mailed on or about December 30,
1998, together with this Proxy Statement, to all shareholders of record as of
December 28, 1998.
CUMULATIVE VOTING RIGHTS
In the election of directors, shareholders have cumulative voting rights.
Cumulative voting rights consist of the right to vote, in person or by proxy,
the number of shares owned by the shareholder for as many persons as there are
directors to be elected, or to cumulate said shares and give one candidate as
many votes as the number of directors multiplied by the number of his or her
shares shall equal, or to distribute such number of votes among the candidates
as he or she shall think fit.
ITEM 1. ELECTION OF DIRECTORS
All directors are to hold office for a term of one year or until their
respective successors shall be duly elected. The affirmative vote of a plurality
of the votes cast at the Annual Meeting by holders of common stock entitled to
vote is required for the election of each nominee as a director. Unless
otherwise specified, votes represented by the proxies will be cast equally for
the election of the below-named nominees to the office of director; however, the
votes may be cast cumulatively for less than the entire number of nominees if
any situation arises that, in the opinion of the proxy holders, makes such
action necessary or desirable. If any of the nominees should be unable to serve
or will not serve, which is not anticipated, management reserves discretionary
authority to vote for a substitute.
1
<PAGE>
INFORMATION CONCERNING NOMINEES FOR ELECTION AS DIRECTORS
JAMES R. BORIS, 54. Chairman and Chief Executive Officer of EVEREN
[PHOTO] Capital Corporation (1995) and EVEREN Securities, Inc., a wholly
owned subsidiary (1990). Mr. Boris also was an Executive Vice
President of Kemper Corporation (1994-1995) and a director of Kemper
Financial Companies, Inc. and its major subsidiaries (1990-1995).
WILLIAM J. BRODSKY, 54. Director since July 1997. Chairman and
[PHOTO] Chief Executive Officer (1997) of The Chicago Board Options
Exchange. Prior to that, Mr. Brodsky was President and CEO of The
Chicago Mercantile Exchange (1985-1997) and Executive Vice President
of the American Stock Exchange (1979-1982).
PASTORA SAN JUAN CAFFERTY, 58. Director since 1988. Professor,
since 1985, at the University of Chicago, Chicago, Illinois, where
[PHOTO] she has been on the faculty since 1971. Mrs. Cafferty is also a
director of Bankmont Financial Corp. and its subsidiaries, Harris
Bankcorp, Inc., Harris Bankmont, Inc. and Harris Trust and Savings
Bank, Kimberly-Clark Corporation, and Waste Management, Inc.
HOMER J. LIVINGSTON, JR., 63. Director since 1989. President and
Chief Executive Officer (1993-1995), until his retirement in May
[PHOTO] 1995, of the Chicago Stock Exchange, Chicago, Illinois. Prior to
that, Mr. Livingston was Chairman of the Board and Chief Executive
Officer (1988-1992) of H. Livingston & Company, L.P. Mr. Livingston
is also a director of American National Can Corp., and EVEREN
Capital Corporation.
LESTER H. MCKEEVER, JR., 64. Managing Principal of Washington,
[PHOTO] Pittman & McKeever, LLC, certified public accountants and management
consultants. Mr. McKeever is also Chairman of the Board of the
Federal Reserve Bank of Chicago and a director of Photogen
Technologies, Inc. and MBIA Insurance Corporation of Illinois.
2
<PAGE>
<TABLE>
<C> <S>
WILLIAM G. MITCHELL, 67. Director since 1982. Vice Chairman (1986)
and Director (1977), until his retirement in May 1987, of Centel
[PHOTO] Corporation, Chicago, Illinois, a telephone utility and
business-related communications firm. Prior to becoming Vice
Chairman, Mr. Mitchell was President (1977-1986) of Centel. Mr.
Mitchell is also a director of The Sherwin-Williams Company, The
Northern Trust Corporation and its subsidiary The Northern Trust
Company, and The Interlake Corporation.
THOMAS M. PATRICK, 52. Director since 1998. President and Chief
[PHOTO] Operating Officer (1998) and Director (1998) of the Company. Mr.
Patrick is also President and Chief Operating Officer (1998) and
Director (1997) of The Peoples Gas Light and Coke Company and North
Shore Gas Company, subsidiaries of the Company. Prior to becoming
President, Mr. Patrick was Executive Vice President (1997-1998) of
the Company and its subsidiaries and Vice President (1989-1996) of
both subsidiaries. Mr. Patrick has been an employee of the Company
and/or its subsidiaries since 1976.
RICHARD E. TERRY, 61. Director since 1984. Chairman of the Board
[PHOTO] and Chief Executive Officer (1990) of the Company. Mr. Terry is also
Chairman of the Board and Chief Executive Officer (1990), and a
director (1982) of The Peoples Gas Light and Coke Company and North
Shore Gas Company, subsidiaries of the Company. Prior to becoming
Chairman, Mr. Terry was President and Chief Operating Officer
(1987-1990), Executive Vice President (1984-1987), and Vice
President and General Counsel (1981-1984) of the Company and its
subsidiaries. Mr. Terry has been an employee of the Company and/or
its subsidiaries since 1972. Mr. Terry is also a director of Amsted
Industries, and Bankmont Financial Corp. and its subsidiaries,
Harris Bankcorp, Inc., Harris Bankmont, Inc. and Harris Trust and
Savings Bank.
RICHARD P. TOFT, 62. Director since 1988. Chairman of the Board and
Chief Executive Officer (1996) of Alleghany Asset Management, Inc.,
[PHOTO] Chicago, Illinois, an investment management and advisory service
subsidiary of Alleghany Corp. Mr. Toft is also Chairman of the Board
of Chicago Title Corporation. Previously, Mr. Toft was Chairman of
the Board and Chief Executive Officer of Chicago Title and Trust
Company (1982-1996). Mr. Toft is also a director of The Cologne Life
Reinsurance Company, and The Chicago Trust Company.
ARTHUR R. VELASQUEZ, 60. Director since 1985. Chairman, President
and Chief Executive Officer, since 1989, of Azteca Foods, Inc.,
[PHOTO] Chicago, Illinois, a Mexican food products company. Prior to that,
Mr. Velasquez was President and Chief Executive Officer (1971-1987)
of Azteca Corn Products Corporation. Mr. Velasquez was also
President of CID Broadcasting, Inc. (1980-1995) and President of
Crescent Communications of California, Inc. (1993-1995). Mr.
Velasquez is also a director of Arvin Industries, Inc., and LaSalle
National Corporation.
</TABLE>
3
<PAGE>
MEETINGS AND FEES OF THE BOARD OF DIRECTORS
The Board of Directors held eight meetings during fiscal 1998. All incumbent
directors attended at least 85% or more of the aggregate number of meetings of
the Board and of those committees on which such directors served.
Directors who are not employees receive an annual retainer of $25,000 and a
meeting fee of $1,000 for each Board and each committee meeting attended. In
addition, any non-employee director who serves as chairman of a committee of the
Board receives a $3,000 annual retainer. Officers of the Company who serve on
the Board receive no compensation as directors.
The Company offers non-employee directors an opportunity to defer their
director's compensation. Under the Directors Deferred Compensation Plan, a
director may elect to defer the receipt of compensation earned as a director
until a future date and to receive such compensation at that time in the form of
cash, Company common stock, or a combination of both. An election to defer, or
to cease to defer, compensation earned as a director of the Company is effective
only with respect to compensation earned in the calendar year following the year
in which the election is made, but in no event with respect to compensation
earned within six months after the date on which the election is made.
A bookkeeping account is maintained for each participant. The account
reflects the amount of cash and/or the number of share equivalents to which the
participant is entitled under the terms of the plan.
The account of a participant who elects to defer compensation in the form of
cash is credited with the dollar amount of compensation so deferred on each date
that the participant is entitled to payment for services as a director. Interest
on the cash balance of the account is computed and credited quarterly as of
March 31, June 30, September 30, and December 31 of each year at the prime
commercial rate in effect at Harris Trust and Savings Bank, Chicago, Illinois.
The account of a participant who elects to defer compensation in the form of
stock is credited with share equivalents on each date that the participant is
entitled to payment for services as a director. The number of share equivalents
so credited is determined by dividing the compensation so deferred by the mean
price of a share of Company common stock on the New York Stock Exchange on such
date. Additional share equivalents are credited to the director's account on
each date that the Company pays a dividend on the common stock. During the
fiscal year ended September 30, 1998, plan participants as a group were credited
with 3,137.138 share equivalents for compensation deferred in the form of stock,
with an average per-share base price of $37.12. During the same period, such
participants were credited with $39,509.03 for compensation deferred in the form
of cash.
COMMITTEES OF THE BOARD OF DIRECTORS
The standing committees of the Board of Directors of the Company during
fiscal 1998 were the Audit, Compensation-Nominating, Public Policy, and
Executive Committees.
The Audit Committee makes recommendations to the Board concerning the
appointment of the Company's independent public accountants and reviews with the
accountants the scope and nature of the audit engagement, the fees for services
performed by the firm, and the results of the completed audit. The Committee
also reviews and discusses with the internal audit department, management, and
the Board, such matters as accounting policies, internal controls, and
procedures for preparation of financial statements. In addition, the Committee
oversees the selection of independent public accountants to perform audits of
certain Company-sponsored employee benefit plans and reviews reports regarding
the results of such audits. The members of the Audit Committee are Messrs.
Velasquez (Chairman), Brodsky, Mitchell, Toft, and Mrs. Cafferty. The Committee
held three meetings in fiscal 1998.
The Compensation-Nominating Committee considers and makes recommendations to
the Board concerning salary compensation for elected officers of the Company and
its subsidiaries. The Committee
4
<PAGE>
also considers, reviews and grants awards under the Company's Long-Term
Incentive Compensation Plan (LTIC Plan) and Short-Term Incentive Compensation
Plan (STIC Plan) to officers (and, with respect to the LTIC Plan, other key
employees) of the Company and its subsidiaries other than the Chief Executive
Officer. With respect to the Chief Executive Officer, the Committee considers,
reviews and makes awards under the LTIC Plan and the STIC Plan subject to the
approval of the non-employee directors of the Board.
The Committee also makes recommendations to the Board regarding nominees for
election as members of the Board of the Company. The Committee will consider
written recommendations from shareholders of the Company regarding potential
nominees for election as directors. To be considered for inclusion in the slate
of nominees proposed by the Board at the next Annual Meeting of Shareholders of
the Company, such recommendations should be received in writing by the Secretary
of the Company no later than November 16, 1999. In addition, the Committee
maintains, with the approval of the Board, formal criteria for selecting
directors and also considers other matters, such as the size and composition of
the Board, directors' compensation, benefits, and other forms of remuneration.
The members of the Compensation-Nominating Committee are Messrs. Neal
(Chairman), Brodsky, Livingston, Mitchell, and Toft. Due to mandatory retirement
at age 70, Mr. Neal will not be standing for re-election. The Committee held
three meetings in fiscal 1998.
The Public Policy Committee prepares reports to the Board and provides
advice to management on major public issues affecting the Company or the gas
industry in general. The Committee also considers and makes recommendations to
the Board regarding the Company's Contributions Program and Budget and reviews
and monitors corporate policy with respect to charitable and philanthropic
giving. Members of the Public Policy Committee are Messrs. Livingston
(Chairman), Neal, Velasquez, and Mrs. Cafferty. The Committee held two meetings
in fiscal 1998.
The Executive Committee, in the recess of the Board, has the authority to
act upon most corporate matters that require Board approval. The members of the
Executive Committee are Messrs. Terry (Chairman), Mitchell (Vice Chairman),
Brodsky, Livingston, Neal, Toft, Velasquez, and Mrs. Cafferty. The Committee
held no meetings in fiscal 1998.
5
<PAGE>
SHARE OWNERSHIP OF DIRECTOR NOMINEES,
AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the beneficial
ownership, as of November 30, 1998, of the Company's Common Stock by (a) each
director nominee, the Chief Executive Officer and the four most highly paid
executive officers of the Company and (b) all director nominees and executive
officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY PERCENT
OWNED AS OF NOVEMBER OF
DIRECTOR NOMINEES & OFFICERS 30, 1998(1) CLASS
- ----------------------------------------------------------------------------------- -------------------- -------
<S> <C> <C>
Kenneth S. Balaskovits (5)......................................................... 12,122(3) *
James R. Boris..................................................................... 1,000 *
William J. Brodsky................................................................. 3,513(4) *
Pastora San Juan Cafferty.......................................................... 2,800 *
J. Bruce Hasch (5)................................................................. 48,635(3) *
James Hinchliff.................................................................... 34,918(2)(3) *
Homer J. Livingston, Jr............................................................ 8,842(4) *
William G. Mitchell................................................................ 21,572(4) *
Earl L. Neal....................................................................... 23,500(4) *
Thomas M. Patrick.................................................................. 25,761(2)(3) *
Richard E. Terry................................................................... 90,724(2)(3) *
Richard P. Toft.................................................................... 8,122(4) *
Arthur R. Velasquez................................................................ 6,572(4) *
Director nominees and executive officers as a group................................ 381,303 1.07
</TABLE>
* Percentage of shares beneficially owned does not exceed one percent.
- ------------------------
(1) Unless otherwise indicated, each individual has sole voting and investment
power with respect to the shares of common stock attributed to him or her in
the table.
(2) Includes shares of restricted stock awarded under the Long-Term Incentive
Compensation Plan of the Company, the restrictions on which had not lapsed
as of November 30, 1998, as follows: Messrs. Hinchliff, 4,830; Patrick,
5,720; Terry, 15,480; and all executive officers as a group, 34,585. Owners
of shares of restricted stock have the right to vote such shares and to
receive dividends thereon, but have no investment power with respect to such
shares until the restrictions thereon lapse.
(3) Includes shares that the following have a right to acquire within 60 days
following November 30, 1998, through the exercise of Options granted under
the Long-Term Incentive Compensation Plan of the Company: Messrs.
Balaskovits, 5,000; Hasch, 14,900; Hinchliff, 9,300; Patrick, 10,100; Terry,
33,700; and all executive officers of the Company as a group, 125,200.
(4) Includes 1,013; 7,842; 9,292; 21,424; 7,822; and 6,572 shares to which
Messrs. Brodsky, Livingston, Mitchell, Neal, Toft, and Velasquez,
respectively, are prospectively entitled pursuant to the Directors Deferred
Compensation Plan of the Company.
(5) Messrs. Balaskovits and Hasch retired as of November 1, 1998.
6
<PAGE>
EXECUTIVE COMPENSATION
The following tables set forth information concerning annual and long-term
compensation and grants of stock options, stock appreciation rights (SARs) and
restricted stock awards under the Company's Long-Term Incentive Compensation
Plan. All compensation was paid by the Company and its subsidiaries for services
in all capacities during the three fiscal years set forth below, to (i) the
Chief Executive Officer and (ii) the four most highly compensated executive
officers of the Company other than the Chief Executive Officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION AWARDS
------------------------------
RESTRICTED
ANNUAL COMPENSATION STOCK ALL OTHER
---------------------- AWARDS(1)(2) OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) (#) (3)($)
- ---------------------------------- --------- ---------- ---------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard E. Terry 1998 600,000 245,000 192,828 20,600 18,000
Chairman and Chief 1997 548,500 237,900 152,663 17,800 16,455
Executive Officer 1996 473,500 191,600 145,722 21,200 14,205
J. Bruce Hasch 1998 359,700 132,200 99,706 10,600 10,791
Former President and 1997 345,900 106,700 84,525 9,800 10,377
Chief Operating Officer(4) 1996 332,600 86,000 80,803 11,800 9,978
James Hinchliff 1998 271,100 75,300 55,497 6,000 8,133
Senior Vice President 1997 260,700 67,700 54,338 6,400 7,821
and General Counsel 1996 250,700 54,500 51,797 7,600 7,521
Thomas M. Patrick 1998 254,800 75,300 55,497 6,000 7,644
Executive Vice 1997 231,600 67,700 54,338 6,400 6,948
President 1996 186,800 31,900 33,150 4,800 5,604
Kenneth S. Balaskovits 1998 220,900 61,800 44,209 4,800 6,627
Former Vice President 1997 210,400 53,100 43,988 5,200 6,312
and Controller (4) 1996 172,500 25,700 33,150 4,800 5,175
</TABLE>
- ------------------------
(1) Restricted stock awards are valued at the closing market price as of the
date of grant. The total number of restricted shares held by the named
executive officers and the aggregate market value of such shares at
September 30, 1998 were as follows: Mr. Terry, 14,685 shares, valued at
$528,660; Mr. Hasch, 8,025 shares, valued at $288,900; Mr. Hinchliff, 4,925
shares, valued at $177,300; Mr. Patrick, 4,125 shares, valued at $148,500;
and Mr. Balaskovits, 3,585 shares, valued at $129,060. Dividends are paid on
the restricted shares at the same time and at the same rate as dividends
paid to all shareholders of common stock. Aggregate market value is based on
a per share price of $36.00, the closing price of Peoples Energy's stock on
the New York Stock Exchange on September 30, 1998.
(2) Restricted stock awards granted to date vest in equal annual increments over
a five-year period. If a recipient's employment with the Company terminates,
other than by reason of death, disability, or retirement after attaining age
65, the recipient forfeits all rights to the unvested portion of the
restricted stock award. In addition, the Compensation-Nominating Committee
(and with respect to the CEO, the Compensation-Nominating Committee, subject
to the approval of the non-employee directors) may, in its sole discretion,
accelerate the vesting of any restricted stock awards granted under the
Long-Term Incentive Compensation Plan. Total restricted stock awarded to the
named individuals for 1996 constitutes 12,475 shares, of which 2,495 shares
vested in 1997; 2,495 shares vested in 1998; 2,495 shares will vest in 1999;
2,495 shares will vest in 2000; and the remaining 2,495 shares will vest in
2001. Total restricted stock awarded to the named individuals for 1997
constitutes 11,300 shares, of which 2,260 shares vested in 1998; 2,260
shares will vest in 1999; 2,260 shares will vest in 2000; 2,260 shares will
vest in 2001; and the remaining 2,260 shares will vest in 2002. Total
restricted
7
<PAGE>
stock awarded to the named individuals for 1998 constitutes 11,900 shares,
of which 2,380 shares will vest in 1999; 2,380 shares will vest in 2000;
2,380 shares will vest in 2001; 2,380 shares will vest in 2002; and the
remaining 2,380 shares will vest in 2003.
(3) Company contributions to the Capital Accumulation Plan accounts of the named
executive officers during the above fiscal years. Employee contributions
under the plan are subject to a maximum limitation under the Internal
Revenue Code of 1986, as amended. The Company pays an employee who is
subject to this limitation an additional 50 cents (after October 1, 1998, 60
cents) for each dollar that the employee is prevented from contributing
solely by reason of such limitation. The amounts shown in the table above
reflect, if applicable, this additional Company payment.
(4) Messrs. Hasch and Balaskovits retired as of November 1, 1998.
OPTIONS/SAR GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------
% OF TOTAL OPTIONS/
OPTIONS/SARS SARS GRANTED TO EXERCISE OR GRANT DATE
GRANTED EMPLOYEES IN FISCAL BASE PRICE PRESENT VALUE
NAME AND PRINCIPAL POSITION (#)(1) YEAR (2) ($/SH) EXPIRATION DATE ($)(3)
- ------------------------------ ------------ -------------------- ----------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Richard E. Terry 20,600 12.3% $37.84 01-Oct-07 $131,428
Chairman and Chief Executive
Officer
J. Bruce Hasch 10,600 6.3 37.84 01-Oct-07 67,628
Former President and Chief
Operating Officer(4)
James Hinchliff 6,000 3.6 37.84 01-Oct-07 38,280
Senior Vice President
and General Counsel
Thomas M. Patrick 6,000 3.6 37.84 01-Oct-07 38,280
Executive Vice
President
Kenneth S. Balaskovits 4,800 2.9 37.84 01-Oct-07 30,624
Former Vice President and
Controller (4)
</TABLE>
- ------------------------
(1) The grant of an Option enables the recipient to purchase Peoples Energy
common stock at a purchase price equal to the fair market value of the
shares on the date the Option is granted. The grant of an SAR enables the
recipient to receive, for each SAR granted, cash in an amount equal to the
excess of the fair market value of one share of Peoples Energy common stock
on the date the SAR is exercised over the fair market value of such common
stock on the date the SAR was granted. Options or SARs that expire
unexercised become available for future grants. Before an Option or SAR may
be exercised, the recipient must complete 12 months of continuous employment
subsequent to the grant of the Option or SAR. Options and SARs may be
exercised within 10 years from the date of grant, subject to earlier
termination in case of death, retirement, or termination of employment.
(2) Based on 83,800 Options and 83,800 SARs granted to all employees under
Peoples Energy's Long-Term Incentive Compensation Plan during fiscal 1998.
(3) Present value is determined using a variation of the Black-Scholes
Option-Pricing Model. The model assumes: a) that Options and SARs are
exercised three and one-half years after the date of grant--the average time
Options and SARs were held by recipients under Peoples Energy Long-Term
Incentive Compensation Plan over the past ten years; b) use of an interest
rate equal to the interest rate on a
8
<PAGE>
U.S. Treasury security with a maturity date corresponding to the assumed
exercise date; c) a level of volatility calculated using weekly stock prices
for the three and one-half years prior to the date of grant; d) an expected
dividend yield; and e) that no adjustments were made for non-transferability
or risk of forfeiture. This is a theoretical value for the Options and SARs.
The amount realized from an Option or SAR ultimately depends upon the excess
of the market value of Peoples Energy's stock over the exercise price on the
date the option or SAR is exercised.
(4) Messrs. Hasch and Balaskovits retired as of November 1, 1998.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 1998
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT FISCAL OPTIONS/SARS AT FISCAL
ACQUIRED ON YEAR-END (#) YEAR-END ($)
NAME AND PRINCIPAL (OPTION/SAR) VALUE --------------------------- ----------------------
POSITION EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- ----------- --------- ----------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard E. Terry 0 $0 46,800 20,600 $187,998 $0
Chairman and Chief
Executive Officer
J. Bruce Hasch 0 0 19,200 10,600 65,866 0
Former President and
Chief Operating
Officer(1)
James Hinchliff 0 0 12,600 6,000 43,328 0
Senior Vice
President
and General Counsel
Thomas M. Patrick 0 0 16,600 6,000 73,920 0
Executive Vice
President
Kenneth S. Balaskovits 0 0 5,200 4,800 9,412 0
Former Vice
President
and Controller(1)
</TABLE>
- ------------------------
(1) Messrs. Hasch and Balaskovits retired as of November 1, 1998.
9
<PAGE>
PENSION PLAN TABLE
The following table illustrates various annual straight-life benefits at
normal retirement (age 65) for the indicated levels of average annual
compensation and various periods of service, assuming no future changes in the
Company's pension benefits. The compensation used in the computation of annual
retirement benefits is substantially equivalent to the salary and bonus reported
in the Summary Compensation Table. The benefit amounts shown reflect reduction
for applicable Social Security benefits.
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------
AVERAGE ANNUAL COMPENSATION 20 25 30 35 40
---------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$150,000.............................. $ 54,400 $ 68,000 $ 81,600 $ 90,975 $ 100,350
200,000.............................. 74,400 93,000 111,600 124,100 136,600
250,000.............................. 94,400 118,000 141,600 157,225 172,850
300,000.............................. 114,400 143,000 171,600 190,350 209,100
350,000.............................. 134,400 168,000 201,600 223,475 245,350
400,000.............................. 154,400 193,000 231,600 256,600 281,600
450,000.............................. 174,400 218,000 261,600 289,725 317,850
500,000.............................. 194,400 243,000 291,600 322,850 354,100
550,000.............................. 214,400 268,000 321,600 355,975 390,350
600,000.............................. 234,400 293,000 351,600 389,100 426,600
650,000.............................. 254,400 318,000 381,600 422,225 462,850
700,000.............................. 274,400 343,000 411,600 455,350 499,100
750,000.............................. 294,400 368,000 441,600 488,475 535,350
800,000.............................. 314,400 393,000 471,600 521,600 571,600
850,000.............................. 334,400 418,000 501,600 554,725 607,850
900,000.............................. 354,400 443,000 531,600 587,850 644,100
</TABLE>
Average annual compensation is the average 12-month compensation for the
highest 60 consecutive months of the last 120 months of service prior to
retirement. Compensation is total salary paid to an employee by the Company
and/or its affiliates, including bonuses under Peoples Energy's Short-Term
Incentive Compensation Plan, pre-tax contributions under Peoples Energy's
Capital Accumulation Plan, pre-tax contributions under Peoples Energy's Health
and Dependent Care Spending Accounts Plan, and pre-tax contributions for life
and health care insurance, but excluding moving allowances, exercise of stock
options and SARs, and other compensation that has been deferred.
At September 30, 1998, the credited years of retirement benefit service for
the individuals listed in the Summary Compensation Table were as follows: Mr.
Terry, 34 years; Mr. Hasch, 38 years; Mr. Hinchliff, 26 years; Mr. Patrick, 22
years; and Mr. Balaskovits, 31 years. The benefits shown in the foregoing table
are subject to maximum limitations under the Employee Retirement Income Security
Act of 1974, as amended, and the Internal Revenue Code of 1986, as amended.
Should these benefits at the time of retirement exceed the then-permissible
limits of the applicable Act, the excess would be paid by the Company as
supplemental pensions pursuant to Peoples Energy's Supplemental Retirement
Benefit Plan. The benefits shown give effect to these supplemental pension
benefits.
SEVERANCE AGREEMENTS
The Company has entered into separate severance agreements with certain key
executives, including each of the executives named in the Summary Compensation
Table. The intent of the severance agreements is to assure the continuity of the
Company's administration and operations in the event of a Change in Control of
the Company (as described below). The severance agreements were developed in
accordance with the advice of outside consultants.
The term of each severance agreement is for the longer of 36 months after
the date in which a Change in Control of the Company occurs or 24 months after
the completion of the transaction approved by shareholders described in (iii)
below of the description of a Change in Control. A Change in Control is defined
as occurring when (i) the Company receives a report on Schedule 13D filed with
the Securities and Exchange Commission pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended,
10
<PAGE>
disclosing that any person, group, corporation, or other entity is the
beneficial owner, directly or indirectly, of 20% or more of the common stock of
the Company; (ii) any person, group, corporation, or other entity (except the
Company or a wholly-owned subsidiary), after purchasing common stock of the
Company in a tender offer or exchange offer, becomes the beneficial owner,
directly or indirectly, of 20% or more of such common stock; (iii) the
shareholders of the Company approve (a) any consolidation or merger of the
Company in which the Company is not the continuing or surviving corporation,
other than a consolidation or merger in which holders of the Company's common
stock prior to the consolidation or merger have substantially the same
proportionate ownership of common stock of the surviving corporation immediately
after the consolidation or merger as immediately before; (b) any consolidation
or merger in which the Company is the continuing or surviving corporation, but
in which the common shareholders of the Company immediately prior to the
consolidation or merger do not hold at least 90% of the outstanding common stock
of the Company; (c) any sale, lease, exchange or other transfer of all or
substantially all of the assets of the Company, except where the Company owns
all of the outstanding stock of the transferee entity or the Company's common
shareholders immediately prior to such transaction own at least 90% of the
transferee entity or group of transferee entities immediately after such
transaction; or (d) any consolidation or merger of the Company where, after the
consolidation or merger, one entity or group of entities owns 100% of the shares
of the Company, except where the Company's common shareholders immediately prior
to such merger or consolation own at least 90% of the outstanding stock of such
entity or group of entities immediately after such consolidation or merger; or
(iv) a change in the majority of the members of the Company's Board of Directors
within a 24-month period, unless approved by two-thirds of the directors then
still in office who were in office at the beginning of the 24-month period.
Each severance agreement provides for payment of severance benefits to the
executive in the event that, during the term of the severance agreement, (i) the
executive's employment is terminated by the Company, except for "cause" as
defined therein; or (ii) the executive's employment is terminated due to a
constructive discharge, which includes (a) a material change in the executive's
responsibilities, which change would cause the executive's position with the
Company to become of less dignity, responsibility, prestige or scope; (b)
reduction, which is more than de minimis, in total compensation; (c) assignment
without the executive's consent to a location more than 50 miles from the
current place of employment; or (d) liquidation, dissolution, consolidation,
merger, or sale of all or substantially all of the assets of the Company, unless
the successor corporation has a net worth at least equal to that of the Company
and expressly assumes the obligations of the Company under the executive's
severance agreement.
The principal severance benefits payable under each severance agreement
consist of the following: (i) the executive's base salary and accrued benefits
through the date of termination, including a pro rata portion of awards under
the Company's STIC Plan; (ii) three times the sum of the individual's base
salary, the average of the STIC Plan awards for the prior three years and the
value of the LTIC Plan awards in the prior calendar year; and (iii) the present
value of the executive's accrued benefits under the Company's Supplemental
Retirement Benefits Plan (SRBP) that would be payable upon retirement at normal
retirement age, computed as if the executive had completed three years of
additional service. In addition, the executive will be entitled to continuation
of life insurance and medical benefits for the longer of (a) a period of three
years after termination or (b) a period commencing after termination and ending
when the executive may receive pension benefits without actuarial reduction,
provided that the Company's obligation for such benefits under the severance
agreement shall cease upon the executive's employment with another employer that
provides life insurance and medical benefits. Each severance agreement also
provides that the executive's Options and SARs shall become exercisable upon a
Change in Control and that all Options and SARs shall remain exercisable for the
shorter of (a) three years after termination or (b) the term of such Options and
SARs. Any restricted stock previously awarded to the executive under the LTIC
Plan would vest upon a Change in Control if such vesting does not occur due to a
Change in Control under the terms of the LTIC Plan. The Company is also
obligated under each severance agreement to pay an additional amount to the
executive sufficient on an after-tax basis to satisfy any excise tax liability
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended. The
benefits received by the executive under each agreement are in lieu of benefits
under the Company's termination allowance plan and the executive's benefits
under the SRBP. Each executive would be required to waive certain claims prior
to receiving any severance benefits.
11
<PAGE>
REPORT ON EXECUTIVE COMPENSATION
COMPOSITION OF COMMITTEE
The Compensation-Nominating Committee (Committee) is appointed by the Board
from the membership of the Outside Directors. The Outside Directors are all of
the directors who are not officers or employees of the Company or its
subsidiaries.
OFFICER COMPENSATION GENERALLY
The Board has established a comprehensive officer compensation program
designed to provide equitable and generally competitive cash compensation and
incentives to its officers so as to attract and retain skilled and experienced
officers. Officer compensation is comprised of cash compensation, consisting of
base salary and bonus, and long-term compensation, consisting of non-qualified
stock options (Options), stock appreciation rights (SARs) and restricted stock
awards. The Board annually reviews the competitiveness of each component of
compensation and total compensation with the assistance of the Committee and a
nationally recognized compensation firm (Independent Consultant).
The Committee believes that ownership of Company stock by the Company's
management aligns more closely the interests of management and shareholders. To
encourage appropriate levels of executive stock ownership, the Committee has
adopted ownership guidelines for its officers. The levels of stock ownership
specified by the guidelines range from 3 times the officer's annual base salary
to 1/2 of annual base salary, depending on the officer's position.
BASE SALARY
Salaries for elected officers are established by the Board based on
recommendations of the Committee. The Committee's recommendations are based on
advice and information from the Independent Consultant, a compensation report
prepared by the Human Resources Division of the Company's wholly-owned utility
subsidiary, The Peoples Gas Light and Coke Company, and, for officers other than
the Chairman of the Board and Chief Executive Officer (CEO), the recommendations
of the CEO.
The Committee evaluates the competitiveness of the Company's elected officer
salaries in light of competitive market data for comparable companies, primarily
gas distribution companies having revenues of similar size to those of the
Company. Officer salaries are established by reference to salary range midpoints
that are set slightly above the average for the comparison companies. Actual
salaries may be above or below the midpoint, depending upon the length of
incumbency, the performance of job responsibilities and other factors. The
information used by the Committee is derived from market data collected and
surveys prepared by the Independent Consultant. The Committee considers the
recommendations of the CEO (for officers other than the CEO), as well as market
data, in making its recommendations. The Committee's recommendations consider
not only the general competitiveness of the elected officers' salary ranges and
proposed salaries, but also take into account each individual officer's
performance of his or her job responsibilities.
For fiscal 1998, the Board accepted the Committee's recommendation and
approved a base salary increase for Mr. Terry of $51,500. The Committee's
recommendation was based on the need to maintain the market competitiveness of
Mr. Terry's base salary.
SHORT-TERM INCENTIVE COMPENSATION PLAN
The Short-Term Incentive Compensation Plan (STIC Plan) makes a portion of
executive cash compensation directly related to the Company's short-term
performance.
The STIC Plan provides that cash bonuses may be awarded to officers of the
Company and its subsidiaries based on levels of achievement under performance
measures established at the beginning of each fiscal year. The purposes of the
STIC Plan are: (i) to provide meaningful incentives to participants that will
benefit shareholders and customers through improvements in performance in areas
of strategic concern to the Company; (ii) to provide competitive levels of
compensation to enable the Company to
12
<PAGE>
attract and retain people who are able to make a significant contribution to the
Company's success; and (iii) to encourage teamwork and cooperation in the
achievement of Company goals.
The STIC Plan is administered by the Committee. At the beginning of each
fiscal year, the Committee identifies the officers who will be participants for
the year and establishes award opportunities for each participant based on the
participant's salary range midpoint. The Committee also establishes performance
measures and aligns the measures with award opportunities for each participant.
Awards are computed at the end of each year on the basis of achievement of the
performance measures. The final awards are based on these computed amounts,
adjusted at the Committee's discretion for all participants other than the CEO,
and, with respect to the CEO, at the Committee's discretion subject to the
approval of the Outside Directors. The Committee decided that for fiscal 1998,
awards would be paid under the STIC Plan only if the Company achieved dividend
coverage on a weather normalized basis for the year and did not reduce its
common stock dividend during the year.
For fiscal year 1998, awards for certain participants, including Mr. Terry,
were based entirely on corporate performance measures. Other participants'
awards were based partly on corporate performance measures and partly on
individual or divisional performance measures. For Mr. Terry, the STIC Plan
award opportunities were weighted among five corporate measures--35 percent of
the award based on earnings per share (normalized for weather), 20 percent based
on return on equity, 20 percent based on the gas costs of the utility
subsidiaries, 15 percent based on net income from diversified energy activities
and 10 percent based on customer satisfaction. The award for each of three
measures--earnings per share, net income from diversified energy activities and
customer satisfaction--was determined by comparing the Company's performance to
the respective internally established goal for each measure. The award for
return on equity was determined by ranking the Company's performance in a
comparator group. Companies in the comparator group consist of companies that
are often cited by investment analysts as alternate investment opportunities to
the Company. The award for the gas costs measure was determined by comparing, on
a weighted basis, the performance of the Company's utility subsidiaries in
purchasing gas to two references--the prior year's performance of the utility
subsidiaries with respect to fixed costs and competitive market references with
respect to variable costs.
The award percentages determined under the corporate performance measures
were added together, resulting in a composite award percentage of 48.74 percent
of the maximum award opportunity for Mr. Terry and other participants whose
award opportunity was based solely on corporate performance measures. Based on
these results, the Committee decided upon, and the Outside Directors approved,
an award to Mr. Terry of $245,000.
LONG-TERM INCENTIVE COMPENSATION PLAN
The Long-Term Incentive Compensation Plan (LTIC Plan) is administered by the
Committee for employees other than the CEO and, with respect to the CEO, by the
Committee subject to the approval of the Outside Directors. The Committee has
the duty to select the individuals to whom Options, SARs and restricted stock
awards, or combinations thereof, will be granted, determine the amount and the
extent of such individuals' participation, interpret provisions of the plan, and
promulgate, amend and rescind rules for its administration. With respect to the
CEO, the Committee prescribes the form and content of Options, SARs and
restricted stock granted and is authorized to interpret the plan, to prescribe,
amend or rescind rules relating to it, and to make all other determinations
necessary or advisable for the plan's administration, subject to the approval of
the Outside Directors.
The purpose of the LTIC Plan is to align the interests of key employees with
those of shareholders, thereby increasing those employees' interest in the
financial success and growth of the Company. In selecting employees who receive
awards under the LTIC Plan, the Committee considers the individual's position
and responsibilities, nature of service to the Company, and past, present and
potential contributions to the success of the Company.
The grant of an Option enables the recipient to purchase Company common
stock at a purchase price equal to the fair market value of the shares on the
date the Option was granted. The grant of an SAR entitles the recipient to
receive, for each SAR granted, cash in an amount equal to the excess of the fair
13
<PAGE>
market value of one share of Company common stock on the date the SAR is
exercised over the fair market value of such common stock on the date the SAR
was granted. Before an Option or SAR may be exercised, the recipient must
complete 12 months of continuous employment subsequent to the grant of the
Option or SAR. Options and SARs may be exercised within 10 years from the date
of grant, subject to earlier termination in case of death, retirement, or
termination of employment for other reasons.
The grant of a restricted stock award entitles the recipient to vote the
shares of Company common stock covered by such award and to receive dividends
thereon. The recipient may not transfer or otherwise dispose of such shares
until the restrictions thereon lapse. Restricted stock awards granted to date
vest in equal annual increments over a five-year period from the date of grant.
If a recipient's employment with the Company terminates, other than by reason of
death, disability or retirement after attaining age 65, the recipient forfeits
all rights to the unvested portion of the restricted stock award. In addition,
the Committee (and, with respect to the CEO, the Committee subject to the
approval of the Outside Directors) may, in its discretion, accelerate the
vesting of any restricted stock awards granted under the LTIC Plan.
Grants of Options, SARs and restricted stock are made by the Committee by
general application of the LTIC Plan guidelines. The Committee also considers
the recommendations of the CEO for recipients other than the CEO. Under the
guidelines, the number of Options and SARs is determined for recipients by
applying percentages of salary range midpoints (this percentage varies with the
recipient's position in the Company), and dividing that amount by the Company's
common stock price on or shortly before the date on which Options and SARs will
be granted. To the extent restricted stock is awarded, the recipient's Options
and SARs that would otherwise be granted are reduced at the rate of two Options
and two SARs for each share of restricted stock granted. The Committee's
practice has been to limit an award of restricted stock for a recipient to
one-quarter of the total shares of Options and SARs under the guidelines. All
awards under the LTIC Plan (except for the CEO) are subject to the discretion
and approval of the Committee. With respect to the CEO, the Committee awards
under the LTIC Plan are subject to the discretion and approval of the Outside
Directors. Each year, prior to Committee approval, the Independent Consultant
reviews the LTIC Plan and evaluates the appropriateness of the continued use of
the plan, its guidelines and the value of the grants to be made thereunder.
Based on the application of the guideline formula and the recommendation of
the Independent Consultant, the Committee granted, and the Outside Directors
approved, awards to Mr. Terry of 10,300 Options, 10,300 SARs, and 5,125 shares
of restricted stock.
Section 162(m) of the Internal Revenue Code of 1986, as amended, places a
limit of $1 million on the amount of certain compensation that may be deducted
by the Company in any year with respect to the executive officers named in the
Summary Compensation Table of the proxy statement. Mr. Terry's compensation for
fiscal 1998 exceeded this limit by $56,831.
The Committee will continue to monitor the impact of Section 162(m) on the
Company's compensation programs. The Committee believes it is in the best
interest of the Company's shareholders to retain broader discretion in
determination of performance criteria with respect to certain compensation
programs of the Company than that contemplated by regulations of the Internal
Revenue Service.
Submitted by:
THE COMPENSATION-NOMINATING COMMITTEE
Earl L. Neal (Chairman)
William J. Brodsky
Homer J. Livingston, Jr.
William G. Mitchell
Richard P. Toft
14
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on
Company common stock to the cumulative total return of the S&P 500 Index and the
S&P Utility Index over a five-year period ending September 30, 1998. The graph
assumes that the value of investment in Company common stock and each index was
$100 on September 30, 1993, and that all dividends were reinvested.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PEOPLES ENERGY CORPORATION
<S> <C> <C>
Comparison of Five Year Cumulative Total
Return
Value of Investment
Peoples Energy Corporation Standard & Poors' 500 Index
Sep-93 $100.00 $100.00
Sep-94 $88.05 $103.69
Sep-95 $98.77 $134.53
Sep-96 $129.05 $161.88
Sep-97 $150.75 $227.36
Sep-98 $151.47 $247.92
Fiscal Years
<CAPTION>
PEOPLES ENERGY CORPORATION
<S> <C>
Comparison of Five Year Cumulative Total
Return
Value of Investment
Standard & Poors' Utilities
Index
Sep-93 $100.00
Sep-94 $86.90
Sep-95 $110.87
Sep-96 $118.44
Sep-97 $135.46
Sep-98 $176.14
Fiscal Years
</TABLE>
15
<PAGE>
ITEM 2. APPOINTMENT OF AUDITORS
Shareholders will be asked to ratify the recommendation of the Audit
Committee and the appointment by the Board of Directors of Arthur Andersen LLP
as the independent public accountants for the Company and its subsidiaries for
the fiscal year ending September 30, 1999. Arthur Andersen LLP has been engaged
as the independent public accountants of the Company or The Peoples Gas Light
and Coke Company since 1932.
A representative of Arthur Andersen LLP is expected to be present at the
meeting and will be available to respond to appropriate questions or to make a
statement if said representative so desires.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR SUCH APPOINTMENT.
OTHER MATTERS
Management does not know of any matters to be presented at the meeting other
than those mentioned in the Notice of Annual Meeting of Shareholders. However,
if other matters come before the meeting, it is the intention of the persons
named in the accompanying proxy to vote said proxy in accordance with their
judgment on such matters.
SHAREHOLDER PROPOSALS
Any proposals by shareholders that are intended to be presented for action
at the 2000 Annual Meeting of Shareholders of the Company must be received by
the Company by September 2, 1999, to be considered for inclusion in the proxy
statement and form of proxy relating to such meeting.
PETER KAUFFMAN
Secretary
December 30, 1998
16
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
PEOPLES ENERGY CORPORATION
PLEASE MARK VOTE IN BOX USING DARK INK ONLY.
1. Election of Directors For All Except 2. Ratify the appointment of For Against Abstain
J.R. Boris, W.J. Brodsky, P. Cafferty, For Withheld Nominee(s) written below Arthur Andersen LLP as / / / / / /
H.J. Livingston, Jr., L.H. McKeever, Jr., independent public accountants.
W.G. Mitchell, T.M. Patrick, R.E. Terry, / / / / / /_____________________
R.P. Toft and A.R. Velasquez.
------------------------------------------------------------- THIS PROXY WILL BE VOTED IN ACCORDANCE
| THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL PROPOSALS.| WITH THE SPECIFICATION MADE. IF NO CHOICES
------------------------------------------------------------- ARE INDICATED, THIS PROXY WILL BE VOTED
FOR ALL PROPOSALS.
Dated_______________________________, 1999
__________________________________________
Signature
NOTE: Please sign exactly as your name(s) appears. For joint accounts, each __________________________________________
owner should sign. When signing as executor, administrator, attorney, trustee Signature
or guardian, etc., please give your full title.
- -----------------------------------------------------------------------------------------------------------------------------------
Your vote is important. Please complete, date, sign and detach the above proxy card and promptly return it in the enclosed
envelope.
ADMISSION TICKET
PEOPLES ENERGY CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
FRIDAY, FEBRUARY 26, 1999
11:00 A.M.
HARRIS TRUST AND SAVINGS BANK
8TH FLOOR AUDITORIUM
115 SOUTH LASALLE STREET
CHICAGO, ILLINOIS
ENTER AT THE SOUTHEAST CORNER OF MONROE AND LASALLE STREETS
</TABLE>
<PAGE>
PEOPLES ENERGY CORPORATION
ANNUAL MEETING OF SHAREHOLDERS - FEBRUARY 26, 1999
The undersigned hereby appoints Homer J. Livingston, Jr., William G. Mitchell
and Richard E. Terry, and each of them, with power of substitution in each,
as proxies, with the powers the undersigned would possess if personally
present, to vote all of the undersigned's shares of stock in the Company at
the Annual Meeting of Shareholders of the Company to be held at Harris Trust
and Savings Bank, 115 South LaSalle, Chicago, Illinois, on February 26, 1999,
at 11:00 A.M., and at any adjournment thereof, upon all matters that may
properly come before the meeting, including the matters described in the
Company's Notice of Annual Meeting of Shareholders and Proxy Statement dated
December 30, 1998, subject to any directions indicated on the reverse side of
this card. If any of the nominees should be unable to serve or for good cause
will not serve, which is not anticipated, management reserves discretionary
authority to vote for a substitute.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
IMPORTANT - TO BE SIGNED AND DATED ON THE REVERSE SIDE.
