Nicor Inc.
Form 10-K
Exhibit 10.47

CHANGE-IN-CONTROL AGREEMENT

THIS AGREEMENT dated as of July 20, 2004 (the “Agreement Date”) is made by and
among Nicor Inc. (the “Company”), an Illinois corporation, and Gerald P.
O’Connor (the “Executive”).

ARTICLE I
PURPOSES

The Board of Directors of the Company (the “Board”) has determined that it is in
the best interests of the Company and its shareholders to assure that the
Company and Nicor Gas will have the continued services of the Executive, despite
the possibility or occurrence of a Change in Control of the Company. The Board
believes it is imperative to reduce the distraction of the Executive that would
result from the personal uncertainties caused by a pending or threatened Change
in Control, to encourage the Executive’s full attention and dedication to the
Company and Nicor Gas, and to provide the Executive with compensation and
benefits arrangements upon a Change in Control which are competitive with those
of similarly-situated corporations. This Agreement is intended to accomplish
these objectives.

ARTICLE II
CERTAIN DEFINITIONS

When used in this Agreement, the terms specified below shall have the following
meanings:

2.1 The “Agreement Term” shall begin on the Agreement Date and shall continue
through December 31, 2005. As of December 31, 2005, and on each December 31
thereafter, the Agreement Term shall automatically be extended for one
additional year unless, not later than the preceding June 30, either party shall
have given notice that such party does not wish to extend the Agreement Term. If
a Change in Control shall have occurred during the Agreement Term (as it may be
extended from time to time), the Agreement Term shall continue for a period
ending on the two-year anniversary of the date of the Change in Control, but if
the Termination Date (as defined below) occurs during that two-year period, then
the Agreement Term shall continue until the end of the Severance Period (as
defined below). Unless the Termination Date occurs during the two-year period
after a Change in Control so that the Agreement Term is extended to include the
Severance Period, as provided in the immediately preceding sentence, the
Agreement Term shall not extend beyond the two-year anniversary of the Change in
Control.

2.2 “Effective Date” means the first date during the Agreement Term on which a
Change in Control occurs.

2.3 “Change in Control” means:

2.3.1 The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”) (a “Person”) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of any shares of Common Stock of
the Company or any voting securities of the Company entitled to vote generally
in the election of directors if, as a result of such acquisition, such person
owns 20% or more of either (i) the outstanding shares of common stock of the
Company (the “Outstanding Company Common Stock”), or (ii) the combined voting
power of the outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “Outstanding Company Voting
Securities”); provided, however, that for purposes of this subsection 2.3.1, the
following acquisitions shall not constitute a Change in Control: (A) any
acquisition by the Company, (B) any acquisition by an employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company (a “Company Plan”), or (C) any acquisition by any
corporation pursuant to a transaction which complies with subsections 2.3.3.1,
2.3.3.2 and 2.3.3.3 of this definition; provided further, that for purposes of
clause (A), if any Person (other than the Company or any Company Plan) shall
become the beneficial owner of 20% or more of the Outstanding Company Common
Stock or 20% or more of the Outstanding Company Voting Securities by reason of
an acquisition by the Company, and such Person shall, after such acquisition by
the Company, become the beneficial owner of any additional shares of the
Outstanding Company Common Stock or any additional Outstanding Company Voting
Securities (other than pursuant to any dividend reinvestment plan or arrangement
maintained by the Company) and such beneficial ownership is publicly announced,
such additional beneficial ownership shall constitute a Change in Control; or

2.3.2 Individuals who, as of the date hereof, constitute the Board of Directors
of the Company (for purposes of this Section 2.3, the “Incumbent Board”) cease
for any reason to constitute at least a majority of the Incumbent Board;
provided, however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by the Company
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or publicly threatened election contest (as such terms are
used in Rule 14a-11 promulgated under the Exchange Act) or other actual or
publicly threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board of Directors of the Company; or

2.3.3 Consummation, including receipt of any necessary regulatory approval, of
(i) a reorganization, merger, consolidation or other business combination
involving the Company or (ii) the sale or other disposition of more than 50% of
the operating assets of the Company (determined on a consolidated basis), other
than in connection with a sale-leaseback or other arrangement resulting in the
continued utilization of such assets (or the operating products of such assets)
by the Company (any transaction described in part (i) or (ii) being referred to
as a “Corporate Transaction”); excluding, however, a Corporate Transaction
pursuant to which:

2.3.3.1 all or substantially all of the individuals and entities who are the
beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Corporate
Transaction beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the ultimate
parent entity resulting from such Corporate Transaction (including, without
limitation, an entity which, as a result of such transaction, owns the Company
or all or substantially all of the assets of the Company either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Corporate Transaction of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be;

2.3.3.2 no Person (other than the Company, any Company Plan or related trust,
the corporation resulting from such Corporate Transaction, and any Person which
beneficially owned, immediately prior to such Corporate Transaction, directly or
indirectly, 20% or more of the Outstanding Company Common Stock or the
Outstanding Company Voting Securities, as the case may be) will beneficially
own, directly or indirectly, 20% or more of, respectively, the then outstanding
common stock of the ultimate parent entity resulting from such Corporate
Transaction or the combined voting power of the then outstanding voting
securities of such entity; and

2.3.3.3 individuals who were members of the Incumbent Board will constitute at
least a majority of the members of the board of directors of the ultimate parent
entity resulting from such Corporate Transaction; or

2.3.4 A tender offer (for which a filing has been made with the Securities and
Exchange Commission (the “SEC”) which purports to comply with the requirements
of Section 14(d) of the Exchange Act and the corresponding SEC rules) is made
for the stock of the Company, which has not been negotiated and approved by the
Board, provided that in case of a tender offer described in this subsection
2.3.4, the Change in Control will be deemed to have occurred at the first time
during the offer period when the Person (as defined in subsection 2.3.1, above)
making the offer beneficially owns or has accepted for payment stock of the
Company with 20% or more of the combined voting power of the then Outstanding
Company Voting Securities; or

2.3.5 Approval by the shareholders of the Company of a plan of complete
liquidation or dissolution of the Company.

2.3.6 For purposes of this Section 2.3, (i) the term “Company” shall mean Nicor
Inc. and shall include any Successor to Nicor Inc.; and (ii) the term “Successor
to Nicor Inc.” shall mean any corporation, partnership, joint venture or other
entity that succeeds to the interests of Nicor Inc. by means of a merger,
consolidation, or other restructuring that does not constitute a Change in
Control under paragraphs 2.3.1, 2.3.3 or 2.3.4 above.

2.3.7 By entering into this Agreement, the Executive irrevocably consents to the
modification of the definition of “Change in Control” (including “change in
control”) in all Employee Benefit Arrangements (as defined below), by
substituting for such definition in each such Employee Benefit Arrangement the
definition of “Change in Control” set forth above, with such substitution to be
effective on the first date this Agreement has been signed by both the Company
and the Executive. For purposes of the preceding sentence, the term “Employee
Benefit Arrangement” shall mean each agreement with the Executive to which the
Company or any Subsidiary is a party, and each plan or arrangement maintained by
the Company or any Subsidiary, and including any awards outstanding under any
such agreement, plan, or arrangement, to the extent that such award, agreement,
plan, or arrangement contains a definition of “Change in Control.” However, to
the extent that the Employee Benefit Arrangement provides for an award based on
common stock of the Company (including, without limitation, an award of stock
options or shares of restricted stock), and such Employee Benefit Arrangement
provides that vesting or exercisability of such award will occur at the time of
the Change in Control (rather than the occurrence of a subsequent event, such as
termination of employment), the definition of “Change in Control” that is
substituted for the definition in such Employee Benefit Arrangement shall be the
definition of “Change in Control” set forth above, except that Section 2.3.4
shall be modified by adding, at the end of such Section, immediately prior to
the word “or,” the following: “provided, however, that the Change in Control
shall occur three (3) business days before such tender offer is to terminate,
unless the offer is withdrawn first, if the Person making the offer could own,
by the terms of the offer plus any shares beneficially owned by that Person,
stock with 50% or more of the combined voting power of the then Outstanding
Company Voting Securities when the offer (and any subsequent offering period)
terminates;”

2.3.8 By entering into this Agreement, the Executive irrevocably consents to the
amendment of the Nicor Inc. Stock Deferral Plan to provide for distribution, as
soon as practicable following a Change in Control, of any amounts which may then
be deferred for the Executive under such plan.

2.4 “Code” means the Internal Revenue Code of 1986, as amended.

2.5 “Employment Period” means the period commencing on the Effective Date and
ending on the two-year anniversary of that date.

2.6 “Incentive Plan” shall have the meaning set forth in Section 3.2.2.

2.7 “Notice of Termination” means a written notice given in accordance with
Section 11.8 which sets forth (a) the specific termination provision in this
Agreement relied upon by the party giving such notice, (b) in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive’s employment under such termination provision, and (c) if the
Termination Date is other than the date of receipt of such Notice of
Termination, the Termination Date.

2.8 “Plans” shall have the meaning set forth in Section 3.2.3.

2.9 A “Potential Change in Control” shall exist during any period in which the
circumstances described in Sections 2.9.1, 2.9.2, or 2.9.3 exist (provided,
however, that a Potential Change in Control shall cease to exist not later than
the occurrence of a Change in Control):

2.9.1 The Company enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control, provided that a Potential
Change in Control described in this Section 2.9.1 shall cease to exist upon the
expiration or other termination of all such agreements.

2.9.2 Any person (including the Company) publicly announces an intention to take
or to consider taking actions the consummation of which would constitute a
Change in Control; provided that a Potential Change in Control described in this
Section 2.9.2 shall cease to exist upon the withdrawal of such intention, or
upon a reasonable determination by the Board that there is no reasonable chance
that such actions would be consummated.

2.9.3 The Board adopts a resolution to the effect that, for purposes of this
Agreement, a Potential Change in Control exists; provided that a Potential
Change in Control described in this Section 2.9.3 shall cease to exist upon a
reasonable determination by the Board that the reasons that gave rise to the
resolution providing for the existence of a Potential Change in Control have
expired or no longer exist.

2.10 “Severance Incentive” means the greater of (i) the target annual incentive
under an Incentive Plan applicable to the Executive for the Performance Period
in which the Termination Date occurs, or (ii) the average of the actual annual
incentives paid (or payable, to the extent not previously paid) to the Executive
under the applicable Incentive Plan for each of the two calendar years preceding
the calendar year in which the Termination Date occurs.

2.11 “Severance Period” means the period beginning on the Executive’s
Termination Date and ending on the second anniversary thereof; provided,
however, that no Severance Period will occur unless the Executive’s Termination
Date occurs under circumstances described in Section 5.1 (relating to
termination by the Executive for Good Reason or by the Company and Nicor Gas
other than for Cause or Permanent Disability).

2.12 “Subsidiary” shall mean any corporation, partnership, joint venture or
other entity during any period in which at least a fifty percent interest in
such entity is owned, directly or indirectly, by the Company (or a successor to
the Company).

2.13 “Termination Date” means the first day on or after which the Executive is
not employed by the Company or Nicor Gas; provided, however, that (a) if the
Company and Nicor Gas terminate the Executive’s employment other than for Cause
or Disability (as defined in Section 4.1.2), then the Termination Date shall be
the date of receipt of the Notice of Termination and (b) if the Executive’s
employment is terminated by reason of death or Disability, then the Termination
Date shall be the date of death of the Executive or the Disability Effective
Date (as defined in Section 4.1.1), as the case may be.

2.14 “Welfare Plans” shall have the meaning set forth in Section 3.2.4.

ARTICLE III
TERMS OF EMPLOYMENT

3.1 Position and Duties.

3.1.1 The Company hereby agrees to cause the Company and/or Nicor Gas to
continue the Executive’s employment during the Employment Period and, subject to
Article IV of this Agreement, the Executive agrees to remain in the employ of
the Company and Nicor Gas, as applicable, subject to the terms and conditions
hereof. During the Employment Period, (i) the Executive’s position (including
status, offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned to the Executive at
any time during the 90-day period immediately preceding the Effective Date, and
(ii) the Executive’s services shall be performed at the location where the
Executive was employed immediately preceding the Effective Date or any office or
location less than 25 miles from such location.

3.1.2 During the Employment Period, and excluding any periods of vacation and
sick leave to which the Executive is entitled, the Executive agrees to devote
reasonable attention and time during normal business hours to the business and
affairs of the Company and Nicor Gas, as applicable, and, to the extent
necessary to discharge the responsibilities assigned to the Executive hereunder,
to use the Executive’s reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period it shall not be
a violation of this Agreement for the Executive (i) to serve on corporate, civic
or charitable boards or committees, (ii) to deliver lectures, fulfill speaking
engagements or teach at educational institutions and (iii) to manage personal
investments, to the extent that such other activities do not, in the reasonable
judgment of the Chief Executive Officer of the Company (the “CEO”), inhibit or
prohibit the performance of the Executive’s duties under this Agreement, or
conflict in any material way with the business of the Company or any Subsidiary;
provided, however, that the Executive shall not serve on the board of any
business, or hold any other position with any business, without the consent of
the CEO.

3.2 Compensation.

3.2.1 Base Salary. During the Employment Period, the Executive shall receive an
annual base salary (“Annual Base Salary”), which shall be paid at an annual rate
at least equal to twelve times the highest monthly base salary paid or payable,
including any base salary which has been earned but deferred, to the Executive
by the Company in respect of the twelve-month period immediately preceding the
month in which the Effective Date occurs. During the Employment Period, the
Annual Base Salary shall be reviewed no more than twelve months after the last
salary increase awarded to the Executive prior to the Effective Date and,
thereafter, at least annually, and shall be increased at any time and from time
to time as shall be substantially consistent with increases in base salary
awarded to other senior executives of the Company. Annual Base Salary shall not
be reduced after any such increase unless such reduction is part of a policy,
program or arrangement applicable to senior executives of the Company and of any
successor entity, and the term Annual Base Salary as used in this Agreement
shall refer to Annual Base Salary as so increased. Any increase in Annual Base
Salary shall not limit or reduce any other obligation of the Company to the
Executive under this Agreement.

3.2.2 Annual Incentive. In addition to Annual Base Salary, the Company shall pay
or cause to be paid to the Executive an incentive award (the “Annual Incentive”)
for each Performance Period or portion thereof which falls within the Employment
Period. “Performance Period” means each period of time designated in accordance
with any annual incentive award arrangement (“Incentive Plan”) which is based
upon performance and approved by the Board or any committee of the Board, or in
the absence of any Incentive Plan or any such designated period of time,
Performance Period shall mean each calendar year. The Executive’s target and
maximum Annual Incentive with respect to any Performance Period shall not be
less than the target and maximum annual incentive award payable with respect to
the Executive under the Company’s annual incentive program as in effect
immediately preceding the Effective Date.

3.2.3 Incentive, Savings and Retirement Plans. During the Employment Period, the
Executive shall be entitled to participate in all incentive, savings and
retirement plans, practices, policies and programs (“Plans”) applicable
generally to other senior executives of the Company, but in no event shall such
Plans provide the Executive with incentive opportunities (measured with respect
to long-term and special incentives, to the extent, if any, that such
distinctions are applicable) or savings and retirement benefits which are less
favorable, in the aggregate, than the greater of (i) those provided by the
Company for the Executive under such Plans as in effect at any time during the
90-day period immediately preceding the Effective Date, or (ii) those provided
generally at any time after the Effective Date to other senior executives of the
Company.

3.2.4 Welfare Benefit Plans. During the Employment Period, the Executive and/or
the Executive’s family, as the case may be, shall be eligible for participation
in and shall receive all benefits under welfare benefit plans, practices,
policies and programs (Welfare Plans”) provided by the Company (including,
without limitation, medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and travel accident
insurance benefits), but in no event shall such Welfare Plans provide the
Executive with benefits which are less favorable, in the aggregate, than the
greater of (i) those provided by the Company for the Executive under such
Welfare Plans as were in effect at any time during the 90-day period immediately
preceding the Effective Date, or (ii) those provided generally at any time after
the Effective Date to other senior executives of the Company.

3.2.5 Other Employee Benefits. During the Employment Period, the Executive shall
be entitled to other employee benefits and perquisites in accordance with the
most favorable plans, practices, programs and policies of the Company, as in
effect with respect to the Executive at any time during the 90-day period
immediately preceding the Effective Date, or if more favorable, as in effect
generally with respect to other senior executives of the Company.

3.2.6 Expenses. During the Employment Period, the Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by the
Executive in accordance with the policies, practices and procedures of the
Company as in effect with respect to the Executive at any time during the 90-day
period immediately preceding the Effective Date, or if more favorable, as in
effect generally with respect to other senior executives of the Company.

3.2.7 Office and Support Staff. During the Employment Period, the Executive
shall be entitled to an office or offices of a size and with furnishings and
other appointments, and to exclusive personal secretarial and other assistance,
as in effect with respect to the Executive at any time during the 90-day period
immediately preceding the Effective Date, or if more favorable, as provided
generally with respect to other senior executives of the Company.

3.2.8 Paid Time Off. During the Employment Period, the Executive shall be
entitled to paid time off in accordance with the plans, policies, programs and
practices of the Company as in effect with respect to the Executive at any time
during the 90-day period immediately preceding the Effective Date, or if more
favorable, as provided generally with respect to other senior executives of the
Company.

3.2.9 Subsidiaries. To the extent that immediately prior to the Effective Date,
the Executive has been on the payroll of, and participated in the incentive or
employee benefit plans of, a Subsidiary of the Company, the references to the
Company contained in Sections 3.2.1 through 3.2.8 and the other sections of this
Agreement referring to benefits to which the Executive may be entitled shall be
read to refer to such Subsidiary.

ARTICLE IV
TERMINATION OF EMPLOYMENT

4.1 Disability.

4.1.1 During the Agreement Term, the Company and Nicor Gas may terminate the
Executive’s employment upon the Executive’s Permanent Disability (as defined in
Section 4.1.2) by giving the Executive or his legal representative, as
applicable, (1) written notice in accordance with Section 11.8 of the Company’s
or Nicor Gas’, as applicable, intention to terminate the Executive’s employment
pursuant to this section, and (2) a certification of the Executive’s Permanent
Disability by a physician selected by the Company or Nicor Gas or its insurers
and reasonably acceptable to the Executive or the Executive’s legal
representative. The Executive’s employment shall terminate effective on the 30th
day (the “Permanent Disability Effective Date”) after the Executive’s receipt of
such notice unless, before the Permanent Disability Effective Date, the
Executive shall have resumed the full-time performance of the Executive’s
duties. During the period in which the Executive has a Disability, the Company
or Nicor Gas, as applicable, may appoint a temporary replacement to assume the
Executive’s responsibilities.

4.1.2 The Executive shall be considered to have a “Permanent Disability” during
any period in which he has a Disability (as defined below); provided, however,
that the Executive shall not be considered to have “Permanent Disability” until
(i) for a period of 180 consecutive days, the Executive, as a result of a
Disability, is incapable, after reasonable accommodation, of performing his
duties under this Agreement on a full-time basis; (ii) such Disability is
reasonably expected to continue for at least another 90 days; and (iii) at the
Executive’s Termination Date, he is eligible for income replacement benefits
under the Company’s or Nicor Gas’ long-term disability plan. The Executive shall
be considered to have a “Disability” during any period in which he has a
physical or mental disability which renders him incapable, after reasonable
accommodation, of performing his duties under this Agreement.

4.2 Death. The Executive’s employment shall terminate automatically upon the
Executive’s death during the Agreement Term.

4.3 Cause. The Company or Nicor Gas, as applicable, may terminate the
Executive’s employment during the Employment Period for Cause. For purposes of
this Agreement, “Cause” means:

4.3.1 the Executive’s willful commission of acts or omissions which have, have
had, or are likely to have a material adverse effect on the business,
operations, financial condition or reputation of the Company or Nicor Gas;

4.3.2 the Executive’s conviction (including a plea of guilty or nolo contendere)
of a felony or any crime of fraud, theft, dishonesty or moral turpitude; or

4.3.3 the Executive’s material violation of any statutory or common law duty of
loyalty to the Company or Nicor Gas.

For purposes of this Agreement, no act, or failure to act, on the part of the
Executive shall be considered “willful” unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive’s action or omission was in the best interests of the Company or Nicor
Gas. Any act, or failure to act, pursuant to direction provided by the person to
whom the Executive reports, or provided by a resolution duly adopted by the
Board, or pursuant to advice of counsel for the Company or Nicor Gas, shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company or Nicor Gas.

4.4 Good Reason. During the Employment Period, the Executive’s employment may be
terminated by the Executive for Good Reason. For purposes of this Agreement,
“Good Reason” means any material breach of this Agreement by the Company or
Nicor Gas, including:

4.4.1 the failure to maintain the Executive in the office or position, or in a
substantially equivalent office or position, held by the Executive immediately
prior to the Change in Control;

4.4.2 a material adverse alteration in the nature or scope of the Executive’s
position, duties, functions, responsibilities or authority;

4.4.3 a material reduction of the Executive’s salary, incentive compensation or
benefits;

4.4.4 the failure of any successor to the Company to assume this Agreement, or a
material breach of the Agreement by the Company or its successor;

4.4.5 a relocation of more than 25 miles of (i) the Executive’s principal
workplace, or (ii) the principal offices of the Company or Nicor Gas, as
applicable, (if such offices are the Executive’s principal workplace), in each
case without the consent of the Executive;

4.4.6 the Company or Nicor Gas, as applicable, requiring the Executive to engage
in travel that is materially greater than the Executive’s travel obligations
during the one-year period immediately prior to the Change in Control; or

4.4.7 any failure by the Company or Nicor Gas, as applicable, to comply with any
of the provisions of Section 3.2 of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company or Nicor Gas, as applicable, promptly after receipt of
notice thereof given by the Executive;

provided, however, that an act or omission of the Company or Nicor Gas, as
applicable, shall not constitute Good Reason: (i) unless the Executive gives the
Company or Nicor Gas, as applicable, written notice of such act or omission and
the Company or Nicor Gas, as applicable, fails to cure such act or omission
within the 30-day period after such notice, or (ii) if the Executive first
acquired knowledge of such act or omission more than 6 months before the
Executive gives the Company or Nicor Gas, as applicable, such notice, or (iii)
if the Executive has consented in writing to such act or omission in a document
that makes specific reference to this Section 4.4.

4.5 Without Cause During a Potential Change in Control. If the Executive’s
employment is terminated by the Company and Nicor Gas, as applicable, without
Cause during a Potential Change in Control, and such date of termination occurs
not more than 180 days prior to the occurrence of a Change in Control and the
Executive establishes by reasonable evidence that such termination of employment
was materially connected with and in anticipation of the Change in Control, then
the Executive shall be entitled to receive the benefits that would have been
provided under Section 5.1, determined as though:

4.5.1 the Executive were rehired by the Company and Nicor Gas, as applicable,
immediately prior to the Change in Control at the salary rate equal to the
Executive’s highest salary rate during the one-year period prior to the date of
the Change in Control, and with other Company and Nicor Gas compensation and
benefit arrangements comparable to those provided to comparable executives of
the Company and Nicor Gas;

4.5.2 the Executive’s employment were terminated by the Company and Nicor Gas
without Cause immediately after the Change in Control; and

4.5.3 this Agreement were in full force and effect at the time of the Change in
Control, and at the time of the Executive’s deemed termination of employment.

4.6 Right of Resignation and Termination. This Agreement does not constitute a
guarantee of continued employment at any time, but instead provides for certain
rights and benefits for the Executive during his employment following the
occurrence of a Change in Control, and in the event his employment with the
Company and Nicor Gas, as applicable, terminates under the circumstances
described herein. The Company and Nicor Gas, as applicable, may terminate the
employment of the Executive at any time for any reason, without breach of this
Agreement, subject to its obligations set forth in Article V and elsewhere in
this Agreement. The Executive may resign from the Company and Nicor Gas, as
applicable, for Good Reason, or for any other reason, without breach of this
Agreement, subject to the Executive’s obligations set forth in this Agreement;
provided that, in the event of a resignation without Good Reason, the Executive
shall provide at least four weeks advance notice of such resignation to the
Company and Nicor Gas, as applicable.. Notwithstanding the foregoing provisions
in this Section 4.6, the Company and Nicor Gas, as applicable, may suspend the
Executive from performing his duties under this Agreement following the delivery
of a Notice of Termination by the Executive without Good Reason; provided,
however, that during the period of suspension (which shall end on the
Termination Date), the Executive shall continue to be treated as employed by the
Company and Nicor Gas, as applicable, for other purposes, and his rights to
compensation or benefits shall not be reduced by reason of the suspension.

ARTICLE V
OBLIGATIONS OF THE COMPANY UPON TERMINATION

5.1 If by the Executive for Good Reason or by the Company and Nicor Gas, as
Applicable, Other Than for Cause or Permanent Disability. If, during the
Employment Period, the Company and Nicor Gas, as applicable, shall terminate the
Executive’s employment other than for Cause or Permanent Disability, or if the
Executive shall terminate employment for Good Reason, the Company’s and Nicor
Gas’ obligations to the Executive shall be as set forth in this Section 5.1. As
a precondition to fulfilling such obligations, the Company shall require the
Executive to execute and deliver a release prepared by the Company and providing
for the Executive’s release of any and all claims against the Company and its
Subsidiaries (and those acting on behalf of them) that may have arisen on or
before the date of the release, which release shall contain such other
reasonable and customary terms as are specified by the Company. Notwithstanding
any other provision of this section to the contrary, to the extent any portion
of such release is subject to the seven-day revocation period prescribed by the
Age Discrimination in Employment Act, as amended, or to any similar revocation
period in effect on the Termination Date, no payment shall be due under this
Section 5.1 until such revocation period has expired without such revocation
occurring.

5.1.1 The Company shall, within five business days of such termination of
employment, pay the Executive a cash payment equal to the sum of the following
amounts:

5.1.1.1 to the extent not previously paid, the Annual Base Salary and any
accrued paid time off through the Termination Date;

5.1.1.2 an amount equal to the product of (i) the Annual Incentive (as defined
in Section 3.2.2) at target for any Performance Period in which the Termination
Date occurs multiplied by (ii) a fraction, the numerator of which is the number
of days the Executive was actually employed by the Company during such
Performance Period, and the denominator of which is the number of days in the
Performance Period; or, if greater, the amount of any Annual Incentive otherwise
payable to the Executive with respect to a Performance Period in which the
Termination Date occurs, which payment shall be in full settlement of Annual
Incentive amounts due with respect to any such Performance Period; and

5.1.1.3 all amounts previously deferred by or accrued to the benefit of the
Executive under any nonqualified deferred compensation plan sponsored by the
Company (including, without limitation, any vested amounts deferred under
incentive plans), together with any accrued earnings thereon, and not yet paid
by the Company; and

5.1.1.4 an amount equal to the product of (A) two (2) multiplied by (B) the sum
of (i) the Executive’s Annual Base Salary, and (ii) the Severance Incentive.

5.1.2 For purposes of each of the Executive’s stock options granted under the
Company’s Long Term Incentive Plan (the “LTIP”), any successor plan, or
otherwise, that is or becomes exercisable on the Termination Date, the
Executive’s termination of employment shall be disregarded, and each such option
shall continue to be exercisable as though the Executive’s employment had
continued through the last day on which such option would be exercisable in the
absence of such employment termination (such earlier date being referred to
herein as the “Applicable Expiration Date”). This Section 5.1.2 shall be
applicable notwithstanding any term of any plan, arrangement, or agreement
providing for early expiration of the option because of the Executive’s
termination of employment, except for an amendment adopted in accordance with
Section 11.7 of this Agreement and that by its specific terms amends this
Agreement.

5.1.3 On the Termination Date (i) the Executive shall become fully vested in,
and may thereupon and until the Applicable Expiration Date of such stock
incentive awards exercise in whole or in part, any and all stock incentive
awards granted to the Executive under the LTIP, any successor plan or otherwise
which have not become exercisable as of the Termination Date; (ii) all
performance units previously awarded to the Executive shall become fully vested,
and a prorated calculation of the target value of all such units shall be done
as of the Termination Date and full payment of such prorated target value shall
be made by the Company within 30 days after the Termination Date; and (iii) the
Executive shall become fully vested at the prorated target level in any other
cash incentive awards granted for the performance period in which the
Termination Date occurs under the LTIP, a successor plan or otherwise which have
not, as of the Termination Date, become fully vested.

5.1.4 All forfeiture conditions that as of the Termination Date are applicable
to any deferred stock unit, restricted stock or restricted share units awarded
to the Executive by the Company pursuant to the LTIP, a successor plan or
otherwise shall lapse immediately (to the extent such awards are outstanding
immediately prior to the Termination Date).

5.1.5 During the Severance Period (or until such later date as any Welfare Plan
of the Company may specify), the Company shall continue to provide to the
Executive and the Executive’s family welfare benefits (including, without
limitation, medical, prescription, dental, disability, individual life and group
life insurance benefits) which are at least as favorable as those provided under
the most favorable Welfare Plans of the Company applicable (i) with respect to
the Executive and his family during the 90-day period immediately preceding the
Termination Date, or (ii) with respect to other senior executives and their
families during the Severance Period. In determining benefits under such Welfare
Plans, the Executive’s annual compensation attributable to base salary and
incentives for any plan year or calendar year, as applicable, shall be deemed to
be not less than the Executive’s Annual Base Salary and Target Annual Incentive.
The cost of the welfare benefits provided under this Section 5.1.5 shall not
exceed the cost of such benefits to the Executive immediately before the
Termination Date or, if less, the Effective Date. Notwithstanding the foregoing,
if the Executive obtains comparable coverage under any Welfare Plans sponsored
by another employer, then the amount of coverage required to be provided by the
Company hereunder shall be reduced by the amount of coverage provided by such
other employer’s Welfare Plans. The Executive’s rights under this Section shall
be in addition to and not in lieu of any post-termination continuation coverage
or conversion rights the Executive may have pursuant to applicable law,
including, without limitation, continuation coverage required by Section  4980B
of the Code. For purposes of determining eligibility for (but not the time of
commencement of) retiree benefits under any Welfare Plans of the Company, the
Executive shall be considered (i) to have remained employed until the last day
of the Severance Period and to have retired on the last day of such period, and
(ii) to have attained the age the Executive would have attained on the last day
of the Severance Period.

5.1.6 If the Executive participates in the Company’s nonqualified supplemental
executive retirement plan (“SERP”), the amount payable under subsection 5.1.1.4
of this Agreement shall be taken into account for purposes of determining the
amount of benefits to which the Executive is entitled under the SERP; provided
that such amount shall be taken into account as though it was earned equally
over the Severance Period, and further provided that the Executive shall be
deemed to have attained the age he or she would have attained as of the last day
of the Severance Period, and completed the number of years of service he or she
would have completed as of the last day of the Severance Period. The Severance
Period shall be taken into account for purposes of determining the amount of and
eligibility to begin to receive benefits under the SERP. If the Executive
participates in the Company's nonqualified Supplemental Senior Officer
Retirement Plan ("SSORP"), on the Termination Date (i) the Executive shall
become fully vested in all contributions (and in any earnings applied to such
contributions) made by the Company on behalf of the Executive under the SSORP or
any successor plan, if applicable, and (ii) the Company shall immediately make
an additional contribution to the SSORP of an amount equal to the product of (x)
the Annual Deferral Percentage (as defined in the SSORP) used for the most
recently completed SSORP Plan Year, times (y) the amount payable under
subsection 5.1.1.4 of this Agreement.

5.1.7 On the Termination Date (i) the Executive shall become fully vested in all
contributions made by the Company on behalf of the Executive under the Company’s
Savings Investment Plan (the “SIP”) or any supplemental or successor plan, if
applicable, and (ii) the Company shall immediately make an additional
contribution to the SIP (or, if such contribution is not permitted under the
terms of the SIP, to a non-qualified plan providing benefits comparable to the
benefits provided under the SIP) or any supplemental or successor plan, if
applicable, equal to the aggregate maximum matching contributions which the
Company would have made on behalf of the Executive to the SIP or any
supplemental or successor plan, if applicable, for the Severance Period,
calculated as if the amount payable under subsection 5.1.1.4 of this Agreement
had been earned equally over the Severance Period and the Executive had made the
maximum allowable voluntary contributions to the SIP or any supplemental or
successor plan, if applicable. In addition, if the Executive is not eligible to
participate in the Company’s defined benefit retirement plan, the Company shall
also contribute to the SIP or any supplemental or successor plan, if applicable,
on the Termination Date an amount equal to the aggregate additional “retirement
growth” contributions which the Company would have made on behalf of the
Executive for the Severance Period if the amount payable under subsection
5.1.1.4 of this Agreement had been earned equally over the Severance Period.

5.1.8 The Company shall, at its sole expense, as incurred, pay on behalf of
Executive all fees and costs charged by a nationally recognized outplacement
firm selected by the Company (subject to approval by the Executive, which shall
not be withheld unreasonably) to provide outplacement service.

5.2 If by the Company and Nicor Gas for Cause. If the Company and Nicor Gas, as
applicable, terminates the Executive’s employment for Cause during the
Employment Period, this Agreement shall terminate without further obligation by
the Company and Nicor Gas, as applicable, to the Executive, other than the
obligation immediately to pay the Executive in cash the Executive’s Annual Base
Salary through the Termination Date, plus any accrued paid time off, in each
case to the extent not previously paid.

5.3 If by the Executive Other Than for Good Reason. If the Executive terminates
employment during the Employment Period other than for Good Reason (including,
but not by way of limitation, voluntary retirement other than for Good Reason),
and other than for Disability or death, this Agreement shall terminate without
further obligation by the Executive or by the Company, other than the obligation
of the Company immediately to pay the Executive in cash the Executive’s Annual
Base Salary through the Termination Date, plus any accrued paid time off, in
each case to the extent not previously paid.

5.4 If by the Company and Nicor Gas, as applicable, for Permanent Disability. If
the Company and Nicor Gas, as applicable, and Nicor Gas, as applicable,
terminates the Executive’s employment by reason of the Executive’s Permanent
Disability during the Employment Period, this Agreement shall terminate without
further obligation to the Executive, other than:

5.4.1 the Company’s obligation immediately to pay the Executive in cash all
amounts specified in Sections 5.1.1.1, 5.1.1.2 and 5.1.1.3, in each case, to the
extent unpaid as of the Termination Date (such amounts collectively, the
“Accrued Obligations”), and

5.4.2 the Executive’s right after the Permanent Disability Effective Date to
receive disability and other benefits at least equal to the greater of (i) those
provided under the most favorable disability Plans applicable to disabled senior
executives of the Company in effect immediately before the Termination Date, or
(ii) those provided under the most favorable disability Plans of the Company in
effect at any time during the 90-day period immediately before the Effective
Date.

5.5 If upon Death. If the Executive’s employment is terminated by reason of the
Executive’s death during the Employment Period, this Agreement shall terminate
without further obligation to the Executive’s legal representatives under this
Agreement, other than the obligation immediately to pay the Executive’s estate
or beneficiary in cash all Accrued Obligations. Notwithstanding anything in this
Agreement to the contrary, the Executive’s family shall be entitled to receive
benefits at least equal to the most favorable benefits provided under Plans of
the Company to the surviving families of senior executives of the Company, but
in no event shall such Plans provide benefits which in each case are less
favorable, in the aggregate, than the most favorable of those provided by the
Company to the Executive under such Plans in effect at any time during the
90-day period immediately before the Effective Date.

ARTICLE VI
CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY

6.1 Gross-up for Certain Taxes.

6.1.1 If it is determined by the Company’s independent auditors that any benefit
received or deemed received by the Executive from the Company pursuant to this
Agreement or otherwise, whether or not in connection with a Change in Control
(such monetary or other benefits collectively, the “Potential Parachute
Payments”) is or will become subject to any excise tax under Section 4999 of the
Code or any similar tax payable under any United States federal, state, local or
other law (such excise tax and all such similar taxes collectively, “Excise
Taxes”), then the Company shall, subject to Sections 6.6 and 6.7, within five
business days after such determination, pay the Executive an amount (the
“Gross-up Payment”) equal to the product of:

(a) the amount of such Excise Taxes multiplied by
 
(b) the Gross-up Multiple (as defined in Section 6.4). The Gross-up Payment is
intended to compensate the Executive for all Excise Taxes payable by the
Executive with respect to the Potential Parachute Payments and any federal,
state, local or other income or other taxes or Excise Taxes payable by the
Executive with respect to the Gross-up Payment.
 
6.1.2 The determination of the Company’s independent auditors described in
Section 6.1.1, including the detailed calculations of the amounts of the
Potential Parachute Payments, Excise Taxes and Gross-Up Payment and the
assumptions relating thereto, shall be set forth in a written certificate of
such auditors (the “Company Certificate”) delivered to the Executive. The
Executive or the Company may at any time request the preparation and delivery to
the Executive of a Company Certificate. The Company shall cause the Company
Certificate to be delivered to the Executive as soon as reasonably possible
after such request.

6.2 Determination by the Executive.

6.2.1 If (i) the Company shall fail to deliver a Company Certificate to the
Executive within 30 days after its receipt of his written request therefor, or
(ii) at any time after the Executive’s receipt of a Company Certificate, the
Executive disputes either (x) the amount of the Gross-Up Payment set forth
therein, or (y) the determination set forth therein to the effect that no
Gross-Up Payment is due (whether by reason of Section 6.7 or otherwise), then
the Executive may elect to require the Company to pay a Gross-Up Payment in the
amount determined by the Executive as set forth in an Executive Counsel Opinion
(as defined in Section 6.5). Any such demand by the Executive shall be made by
delivery to the Company of a written notice which specifies the Gross-Up Payment
determined by the Executive (together with the detailed calculations of the
amounts of Potential Parachute Payments, Excise Taxes and Gross-Up Payment and
the assumptions relating thereto) and an Executive Counsel Opinion regarding
such Gross-Up Payment (such written notice and opinion collectively, the
“Executive’s Determination”). Within 30 days after delivery of an Executive’s
Determination to the Company, the Company shall either (i) pay the Executive the
Gross-Up Payment set forth in Executive’s Determination (less the portion
thereof, if any, previously paid to Executive by the Company) or (ii) deliver to
the Executive a Company Certificate and a Company Counsel Opinion (as defined in
Section 6.5), and pay the Executive the Gross-Up Payment specified in such
Company Certificate. If for any reason the Company fails to comply with the
preceding sentence, the Gross-Up Payment specified in the Executive’s
Determination shall be controlling for all purposes.

6.2.2 If the Executive does not request a Company Certificate, and the Company
does not deliver a Company Certificate to the Executive, then (i) the Company
shall, for purposes of Section 6.7, be deemed to have determined that no
Gross-up Payment is due, and (ii) the Executive shall not pay any Excise Taxes
in respect of Potential Parachute Payments, except in accordance with
Sections 6.6.1 or 6.6.4.

6.3 Additional Gross-up Amounts. If for any reason it is later determined
(whether pursuant to the subsequently-enacted provisions of the Code, final
regulations or published rulings of the IRS, a final judgment of a court of
competent jurisdiction, a determination of the Company’s independent auditors
set forth in a Company Certificate or, subject to the last two sentences of
Section 6.2.1, an Executive’s Determination) that the amount of Excise Taxes
payable by the Executive is greater than the amount determined by the Company or
the Executive pursuant to Section 6.1 or 6.2, as applicable, then the Company
shall, subject to Sections 6.6 and 6.7, pay the Executive an amount (which shall
also be deemed a Gross-up Payment) equal to the product of:
 
(a) the sum of (1) such additional Excise Taxes and (2) any interest, fines,
penalties, expenses or other costs incurred by the Executive as a result of
having taken a position in accordance with determination made pursuant to
Section 6.1 or 6.2, as applicable,
 
multiplied by

(b) the Gross-up Multiple.

6.4 Gross-up Multiple. The Gross-up Multiple shall equal a fraction, the
numerator of which is one (1.0), and the denominator of which is one (1.0) minus
the lesser of (i) the sum, expressed as a decimal fraction, of the effective
marginal tax rates of all federal, state, local and other income and other taxes
and any Excise Taxes applicable to the Gross-up Payment; or (ii) 0.80, it being
intended that the Gross-up Multiple shall in no event exceed five (5.0). (If
different rates of tax are applicable to various portions of a Gross-up Payment,
the weighted average of such rates shall be used.)

6.5 Opinion of Counsel. “Executive Counsel Opinion” means an opinion of
nationally-recognized executive compensation counsel to the effect (i) that the
amount of the Gross-Up Payment determined by the Executive pursuant to
Section 6.2 is the amount that a court of competent jurisdiction, based on a
final judgment not subject to further appeal, is most likely to decide to have
been calculated in accordance with this Article and applicable law and (ii) if
the Company has previously delivered a Company Certificate to the Executive,
that there is no reasonable basis or no substantial authority for the
calculation of the Gross-Up Payment set forth in the Company Certificate.
“Company Counsel Opinion” means an opinion of nationally-recognized executive
compensation counsel to the effect that (i) the amount of the Gross-Up Payment
set forth in the Company Certificate is the amount that a court of competent
jurisdiction, based on a final judgment not subject to further appeal, is most
likely to decide to have been calculated in accordance with this Article and
applicable law and (ii) for purposes of Section 6662 of the Code, the Executive
has substantial authority to report on his federal income tax return the amount
of Excise Taxes set forth in the Company Certificate.

6.6 Amount Increased or Contested.

6.6.1 The Executive shall notify the Company in writing (an “Executive’s
Notice”) of any claim by the IRS or other taxing authority (an “IRS Claim”)
that, if successful, would require the payment by the Executive of Excise Taxes
in respect of Potential Parachute Payments in an amount in excess of the amount
of such Excise Taxes determined in accordance with Section 6.1 or 6.2, as
applicable. Such Executive’s Notice shall include the nature and amount of such
IRS Claim, the date on which such IRS Claim is due to be paid (the “IRS Claim
Deadline”), and a copy of all notices and other documents or correspondence
received by the Executive in respect of such IRS Claim. The Executive shall give
the Executive’s Notice as soon as practicable, but no later than the earlier of
(i) 10 business days after the Executive first obtains actual knowledge of such
IRS Claim or (ii) five business days before the IRS Claim Deadline; provided,
however, that the Executive’s failure to give such notice shall affect the
Company’s obligations under this Article only to the extent that the Company is
actually prejudiced by such failure. If at least one business day before the IRS
Claim Deadline the Company shall:

6.6.1.1 deliver to the Executive a Company Certificate to the effect that the
IRS Claim has been reviewed by the Company’s independent auditors and,
notwithstanding the IRS Claim, the amount of Excise Taxes, interest and
penalties payable by the Executive is either zero or an amount less than the
amount specified in the IRS Claim,

6.6.1.2 pay to the Executive an amount (which shall also be deemed a Gross-Up
Payment) equal to the positive difference between (x) the product of the amount
of Excise Taxes, interest and penalties specified in the Company Certificate, if
any, multiplied by the Gross-Up Multiple, and (y) the portion of such product,
if any, previously paid to the Executive by the Company, and

6.6.1.3 direct the Executive pursuant to Section 6.6.4 to contest the balance of
the IRS Claim, then the Executive shall pay only the amount, if any, of Excise
Taxes, interest and penalties specified in the Company Certificate. In no event
shall the Executive pay an IRS Claim earlier than 30 days after having given an
Executive’s Notice to the Company (or, if sooner, the IRS Claim Deadline).

6.6.2 At any time after the payment by the Executive of any amount of Excise
Taxes or related interest or penalties in respect of Potential Parachute
Payments (whether or not such amount was based upon a Company Certificate or an
Executive’s Determination), the Company may in its discretion require the
Executive to pursue a claim for a refund (“Refund Claim”) of all or any portion
of such Excise Taxes, interest or penalties as the Company may specify by
written notice to the Executive.

6.6.3 If the Company notifies the Executive in writing that the Company desires
the Executive to contest an IRS Claim or to pursue a Refund Claim, the Executive
shall:

6.6.3.1 give the Company all information that it reasonably requests in writing
from time to time relating to such IRS Claim or Refund Claim, as applicable,

6.6.3.2 take such action in connection with such IRS Claim or Refund Claim (as
applicable) as the Company reasonably requests in writing from time to time,
including accepting legal representation with respect thereto by an attorney
selected by the Company, subject to the approval of the Executive (which
approval shall not be unreasonably withheld or delayed),

6.6.3.3 cooperate with the Company in good faith to contest such IRS Claim or
pursue such Refund Claim, as applicable,

6.6.3.4 permit the Company to participate in any proceedings relating to such
IRS Claim or Refund Claim, as applicable, and

6.6.3.5 contest such IRS Claim or prosecute such Refund Claim (as applicable) to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company may from time
to time determine in its discretion.

The Company shall control all proceedings in connection with such IRS Claim or
Refund Claim (as applicable) and in its discretion may cause the Executive to
pursue or forego any and all administrative appeals, proceedings, hearings and
conferences with the IRS or other taxing authority in respect of such IRS Claim
or Refund Claim (as applicable); provided that (i) any extension of the statute
of limitations relating to payment of taxes for the taxable year of the
Executive relating to the IRS Claim is limited solely to such IRS Claim,
(ii) the Company’s control of the IRS Claim or Refund Claim (as applicable)
shall be limited to issues with respect to which a Gross-Up Payment would be
payable, and (iii) the Executive shall be entitled to settle or contest, as the
case may be, any other issue raised by the IRS or other taxing authority.

6.6.4 The Company may at any time in its discretion direct the Executive to
(i) contest the IRS Claim in any lawful manner or (ii) pay the amount specified
in an IRS Claim and pursue a Refund Claim; provided, however, that if the
Company directs the Executive to pay an IRS Claim and pursue a Refund Claim, the
Company shall advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify the Executive, on an after-tax basis,
for any income or other applicable taxes or Excise Tax, and any related interest
or penalties imposed with respect to such advance.

6.6.5 The Company shall pay directly all legal, accounting and other costs and
expenses (including additional interest and penalties) incurred by the Company
or the Executive in connection with any IRS Claim or Refund Claim, as
applicable, and shall indemnify the Executive, on an after-tax basis, for any
income or other applicable taxes, Excise Tax and related interest and penalties
imposed on the Executive as a result of such payment of costs and expenses.

6.7 Refunds. If, after the receipt by the Executive of any payment or advance of
Excise Taxes advanced by the Company pursuant to Section 6.6, the Executive
receives any refund with respect to such claim, the Executive shall (subject to
the Company’s complying with the requirements of Section 6.6) promptly pay the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 6.6, a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its intent to
contest such determination within 30 days after the Company receives written
notice of such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-up Payment required to be paid. Any contest
of a denial of refund shall be controlled by Section 6.6.

ARTICLE VII
EXPENSES AND INTEREST

7.1 Legal Fees and Other Expenses.

7.1.1 If the Executive incurs legal fees or other expenses in an effort to
secure, preserve, establish entitlement to, or obtain benefits under this
Agreement (including, without limitation, the fees and other expenses of the
Executive’s legal counsel in connection with the delivery of the Executive
Counsel opinion referred to in Section 6.5), the Company shall, regardless of
the outcome of such effort, promptly reimburse the Executive on a current basis
for such fees and expenses following the Executive’s written submission of a
request for reimbursement together with evidence that such fees and expenses
were incurred.

7.1.2 If the Executive does not prevail (after exhaustion of all available
judicial remedies) in respect of a claim by the Executive or by the Company
hereunder, and the Company establishes before a court of competent jurisdiction,
by clear and convincing evidence, that the Executive had no reasonable basis for
his claim hereunder, or for his response to the Company’s claim hereunder, and
acted in bad faith, no further reimbursement for legal fees and expenses shall
be due to the Executive in respect of such claim and the Executive shall refund
any amounts previously reimbursed hereunder with respect to such claim.

7.2 Interest. If the Company and Nicor Gas, as applicable, does not pay any
amount due to the Executive under this Agreement within three days after such
amount became due and owing, interest shall accrue on such amount from the date
it became due and owing until the date of payment at an annual rate equal to 200
basis points above the base commercial lending rate published in The Wall Street
Journal in effect from time to time during the period of such nonpayment.

ARTICLE VIII
NO SET-OFF OR MITIGATION

8.1 No Set-off by Company. The Executive’s right to receive when due the
payments and other benefits provided for under this Agreement is absolute,
unconditional and subject to no set-off, counterclaim or legal or equitable
defense. Any claim which the Company may have against the Executive, whether for
a breach of this Agreement or otherwise, shall be brought in a separate action
or proceeding and not as part of any action or proceeding brought by the
Executive to enforce any rights against the Company under this Agreement.

8.2 No Mitigation. The Executive shall not have any duty to mitigate the amounts
payable by the Company and Nicor Gas, as applicable, under this Agreement by
seeking new employment following termination. Except as specifically otherwise
provided in this Agreement, all amounts payable pursuant to this Agreement shall
be paid without reduction regardless of any amounts of salary, compensation or
other amounts which may be paid or payable to the Executive as the result of the
Executive’s employment by another employer.

ARTICLE IX
NON-EXCLUSIVITY OF RIGHTS

9.1 Waiver of Other Severance Rights. Except as may be otherwise specifically
provided in an amendment of this Section 9.1 adopted in accordance with
Section 11.7 of this Agreement, the Executive’s rights under Section 5.1 of this
Agreement shall be in lieu of any benefits that may be otherwise payable to or
on behalf of the Executive pursuant to the terms of any severance pay
arrangement of the Company or any Subsidiary or any other, similar arrangement
of the Company or any Subsidiary providing benefits upon involuntary termination
of employment and shall also be in lieu of any benefits under the Nicor Inc.
Executive/Key Employee Severance Benefits Program (notwithstanding any provision
of that program to the contrary); provided, however, that this Section 9.1 shall
not affect the Executive’s rights to receive any benefits with respect to a
termination of employment that occurs outside of the Employment Period.

9.2 Other Rights. Except as provided in Section 9.1, this Agreement shall not
prevent or limit the Executive’s continuing or future participation in any
benefit, bonus, incentive or other plans provided by the Company or any of its
Subsidiaries and for which the Executive may qualify, nor shall this Agreement
limit or otherwise affect such rights as the Executive may have under any other
agreements with the Company or any of its Subsidiaries. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan
of the Company or any of its Subsidiaries and any other payment or benefit
required by law at or after the Termination Date shall be payable in accordance
with such Plan or applicable law except as expressly modified by this Agreement.

ARTICLE X
CONFIDENTIALITY

10.1 Confidentiality. The Executive acknowledges that it is the policy of the
Company and its Subsidiaries to maintain as secret and confidential all valuable
and unique information and techniques acquired, developed or used by the Company
and its Subsidiaries relating to their business, operations, employees and
customers, which gives the Company and its Subsidiaries a competitive advantage
in the transmission, distribution, marketing, or sale of natural gas or in the
energy services industry and other businesses in which the Company and its
Subsidiaries are engaged (“Confidential Information”). The Executive recognizes
that all such Confidential Information is the sole and exclusive property of the
Company and its Subsidiaries, and that disclosure of Confidential Information
would cause damage to the Company and its Subsidiaries. The Executive agrees
that, except as required by the duties of his employment with the Company or its
Subsidiaries and except in connection with enforcing the Executive’s rights
under this Agreement or if compelled by a court or governmental agency, he will
not, without the consent of the Company, disseminate or otherwise disclose any
Confidential Information obtained during his employment with the Company or its
Subsidiaries until such time as such information has been disclosed publicly by
the Company or one of its Subsidiaries, or with its consent, or is otherwise a
matter of public knowledge (unless the Executive has reason to know that such
information became a matter of public knowledge through an unauthorized
disclosure).

10.2 Remedy. The Executive and the Company specifically agree that, in the event
that the Executive shall breach his obligations under this Article X, the
Company and its Subsidiaries will suffer irreparable injury and shall be
entitled to injunctive relief therefor, and shall not be precluded from pursuing
any and all remedies it may have at law or in equity for breach of such
obligations; provided, however, that such breach shall not in any manner or
degree whatsoever limit, reduce or otherwise affect the obligations of the
Company or Nicor Gas, as applicable, under this Agreement, and in no event shall
an asserted breach of the Executive’s obligations under this Article X
constitute a basis for deferring or withholding any amounts otherwise payable to
the Executive under this Agreement.

ARTICLE XI
MISCELLANEOUS

11.1 No Assignability. This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive’s
legal representatives.

11.2 Successors. Before or upon the consummation of any Change in Control, the
Company shall obtain from each individual, group or entity, if any, that becomes
a successor of the Company by reason of the Change in Control, the unconditional
written agreement of such individual, group or entity to assume this Agreement
and to perform all of the obligations of the Company hereunder.

11.3 Payments to Beneficiary. If the Executive dies before receiving amounts to
which the Executive is entitled under this Agreement, such amounts shall be paid
in a lump sum to the beneficiary designated in writing by the Executive, or if
none is so designated, to the Executive’s estate.

11.4 Nonalienation of Benefits. Benefits payable under this Agreement shall not
be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution or levy of any
kind, either voluntary or involuntary, before actually being received by the
Executive, and any such attempt to dispose of any right to benefits payable
under this Agreement shall be void.

11.5 Severability. If any one or more articles, sections or other portions of
this Agreement are declared by any court or governmental authority to be
unlawful or invalid, such unlawfulness or invalidity shall not serve to
invalidate any article, section or other portion not so declared to be unlawful
or invalid. Any article, section or other portion so declared to be unlawful or
invalid shall be construed so as to effectuate the terms of such article,
section or other portion to the fullest extent possible while remaining lawful
and valid.

11.6 Arbitration. Any and all disputes between the parties hereto arising out of
this Agreement (other than disputes related to Article VI or to an alleged
breach of the covenant contained in Article X) shall be settled by arbitration
before an impartial arbitrator pursuant to the rules and regulations of the
American Arbitration Association (AAA) pertaining to the arbitration of
commercial disputes. Either party may invoke the right to arbitration. The
arbitrator shall be selected by means of the parties striking alternatively from
a panel of seven arbitrators supplied by the Chicago office of AAA. The
Arbitrator shall have the authority to interpret and apply the provisions of
this Agreement, consistent with Section 11.10 below. The decision of the
arbitrator shall be final and binding upon the parties. Judgment may be entered
on the award in any court of competent jurisdiction. The arbitrator’s fees and
expenses shall be borne by the Company.

11.7 Amendments. This Agreement shall not be altered, amended or modified except
by written instrument executed by the Company and the Executive.

11.8 Notices. All notices and other communications under this Agreement shall be
in writing and delivered by hand, by a nationally-recognized commercial delivery
service, or by first-class registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:

If to the Executive:

Gerald P. O’Connor
1300 East Gartner Road
Naperville, IL 60540

If to the Company:

Nicor Inc.
1844 Ferry Road
Naperville, Illinois 60563-9600
Attn: Claudia J. Colalillo

or to such other address as either party shall have furnished to the other in
writing. Notice and communications shall be effective when actually received by
the addressee.

11.9 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

11.10 Governing Law. This Agreement is intended to be interpreted and construed
in accordance with the laws of the State of Illinois, without regard to its
choice of law principles.

11.11 Captions. The captions of this Agreement are not a part of the provisions
hereof and shall have no force or effect.

11.12 Number and Gender. Wherever from the context it appears appropriate, each
term stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in either the masculine, the feminine or the neuter
gender shall include the masculine, feminine and neuter genders.

11.13 Tax Withholding. The Company or Nicor Gas, as applicable, may withhold
from any amounts payable under this Agreement any federal, state or local taxes
that are required to be withheld pursuant to any applicable law or regulation.

11.14 No Waiver. A waiver of any provision of this Agreement shall not be deemed
a waiver of any other provision, and any waiver of any default as to any such
provision shall not be deemed a waiver of any later default as to that or any
other provision.

11.15 Entire Agreement. This Agreement contains the entire understanding of the
Company, Nicor Gas and the Executive with respect to its subject matter.

IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement
as of the date first above written.

/s/ GERALD P. O’CONNOR
Gerald P. O’Connor

Nicor Inc.

By: /s/ THOMAS L. FISHER
Thomas L. Fisher
Chairman and CEO