Nicor Inc.
Form 10-K
Exhibit 10.71
 

 
AMENDED AND RESTATED
CHANGE-IN-CONTROL AGREEMENT
 
THIS AGREEMENT dated as of December 17, 2007 (the “Agreement Date”) is made by
and among Nicor Inc. (the “Company”), an Illinois corporation, and Rocco J.
D’Alessandro (the “Executive”).
 
Executive and the Company have previously entered into a Change-in-Control
Agreement dated November 22, 2002 (the “Prior Agreement”).  The Company and
Executive desire to amend and restate the Prior Agreement to conform to the
requirements of Section 409A of the Code.
 
ARTICLE I
PURPOSES
 
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, 2008.  As of December 31, 2008, 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.   “Board” means the board of directors of the Company.
 
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2.3.   “Change in Control” means the occurrence of a “change in the ownership,”
a “change in the effective control” or a “change in the ownership of a
substantial portion of the assets” of an entity, as determined in accordance
with this Section.  In determining whether an event shall be considered a
“change in the ownership,” a “change in the effective control” or a “change in
the ownership of a substantial portion of the assets” of an entity, the
following provisions shall apply:
 
2.3.1   A “change in the ownership” of the Company shall occur on the date on
which any one person, or more than one person acting as a group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (a “Person”)), acquires ownership of the equity securities of the
Company that, together with the equity securities held by such Person,
constitutes more than 50% of the total fair market value or total voting power
of the Company, as determined in accordance with Treas. Reg.
§1.409A-3(i)(5)(v).  If a Person is considered either to own more than 50% of
the total fair market value or total voting power of the equity securities of
the Company, or to have effective control of the Company within the meaning of
Section 2.3.2, and such Person acquires additional equity securities of the
Company, the acquisition of additional equity securities by such Person shall
not be considered to cause a “change in the ownership” of the Company.
 
2.3.2   A “change in the effective control” of the Company shall occur on either
of the following dates:
 
2.3.2.1   The date on which any Person, acquires (or has acquired during the
12-month period ending on the date of the most recent acquisition by such
Person) ownership of stock of the Company possessing 30% or more of the total
voting power of the Company’s equity securities, as determined in accordance
with Treas. Reg. §1.409A-3(i)(5)(vi).  If a Person is considered to possess 30%
or more of the total voting power of the Company’s equity securities, and such
Person acquires additional stock of the Company, the acquisition of additional
stock by such Person shall not be considered to cause a “change in the effective
control” of the Company; or
 
2.3.2.2 The date on which a majority of the members of the Board is replaced
during any 12-month period by directors whose appointment or election is not
endorsed by a majority of the members of the Board before the date of the
appointment or election, as determined in accordance with Treas. Reg.
§1.409A-3(i)(5)(vi).
 
2.3.3   A “change in the ownership of a substantial portion of the assets” of
the Company shall occur on the date on which any one Person acquires (or has
acquired during the 12-month period ending on the date of the most recent
acquisition by such Person) assets from the Company that have a total gross fair
market value equal to or more than 40% of the total gross fair market value of
all of the assets of the Company immediately before such acquisition or
acquisitions, as determined in accordance with Treas. Reg.
§1.409A-3(i)(5)(vii).  A transfer of assets shall not be treated as a “change in
the ownership of a substantial portion of the assets” when such transfer is made
to an entity that is controlled by the holders of the Company’s equity
securities, as determined in accordance with Treas. Reg.
§1.409A-3(i)(5)(vii)(B).
 
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2.3.4   Notwithstanding the foregoing, the following acquisitions shall not
constitute a Change in Control: (i) an acquisition by the Company or entity
controlled by the Company, or (ii) an acquisition by an employee benefit plan
(or related trust) sponsored or maintained by the Company or any entity
controlled by the Company.
 
2.3.5   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.
 
2.4.   “Code” means the Internal Revenue Code of 1986, as amended.
 
2.5.   “Effective Date” means the first date during the Agreement Term on which
a Change in Control occurs.
 
2.6.   “Employment Period” means the period commencing on the Effective Date and
ending on the two-year anniversary of that date.
 
2.7.   “Incentive Plan” shall have the meaning set forth in Section 3.2.2.
 
2.8.   “Payment Date” means the date on which all of the following are complete
(i) the Termination Date, (ii) the execution of the release required pursuant to
Section 5.1, and (iii) the expiration of the required revocation period
specified in the release without revocation occurring.
 
2.9.   “Plans” shall have the meaning set forth in Section 3.2.3.
 
2.10.  A “Potential Change in Control” shall exist during any period in which
the circumstances described in Sections 2.10.1, 2.10.2, or 2.10.3 exist
(provided, however, that a Potential Change in Control shall cease to exist not
later than the occurrence of a Change in Control):
 
2.10.1  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 2.10.1 shall cease to exist upon the
expiration or other termination of all such agreements.
 
2.10.2  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 2.10.2 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.
 
2.10.3  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 2.10.3 shall cease to exist upon a
reasonable determination by the Board
 
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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.
 
2.11.  “Separation from Service” means the termination of Executive’s services
to the Company and all Subsidiaries, whether voluntarily or involuntarily, other
than by reason of death, in accordance with Treas. Reg. §1.409A-1(h).
 
2.12.  “Severance Incentive” means the greater of (i) the target annual
incentive under an Incentive Plan applicable to the Executive for the
Performance Period (as such term is defined in Section 3.2.2) 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.
 
2.13.  “Severance Period” means the period beginning on the Executive’s
Termination Date and ending on the third 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).
 
2.14.  “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).
 
2.15.  “Termination Date” means the first day on or after which the Executive
has a Separation from Service.
 
2.16.  “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
 
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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 (including, without
limitation, the Nicor Inc. Salary Deferral Plan and the Nicor Inc. Stock
Deferral Plan) (“Plans”) applicable generally to other senior executives of the
Company, but in no event shall such Plans provide the Executive with incentive
 
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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.  The Executive shall be entitled to receive prompt
reimbursements for all reasonable expenses incurred by the Executive during the
Employment Period 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.  All
such expenses shall be reimbursed no later than the date six (6) months
following the Termination Date.  The amount of expenses reimbursed in one year
shall not affect the amount eligible for reimbursement in any subsequent year.
 
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.
 
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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;
 
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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:
 
4.4.1   a material diminution in the Executive’s base compensation;
 
4.4.2   a material diminution in the authority, duties or responsibilities of
the Executive;
 
4.4.3   a material change, of not less than 25 miles, in the geographic location
at which the Executive must provide services; or
 
4.4.4   any other action or inaction that constitutes a material breach by the
Company of this Agreement;
 
provided, however, that the above conditions, as applicable, shall not
constitute Good Reason: (i) unless the Executive gives the Company or Nicor Gas,
as applicable, written notice of such condition and the Company or Nicor Gas, as
applicable, fails to remedy the condition within 30 days of such notice; (ii) if
the initial existence of the condition is more than 90 days before the Executive
gives the Company or Nicor Gas such notice; or (iii) if the Executive has
consented in writing to such condition 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:
 
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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.
 
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 within 60 days following his Termination Date 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 provisions to the contrary, no payments
shall be made or other benefits arise pursuant to this Section 5.1 unless and
until such binding release is effective.  If such release is not delivered by
the Executive within 60 days following the Executive’s Termination Date, all
rights of the Executive with respect to this Agreement and any benefits
hereunder shall be forfeited.
 
5.1.1   The Company shall, within five business days of the Payment Date, pay
the Executive a cash payment equal to the sum of the following amounts:
 
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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;
 
5.1.1.3   an amount equal to the product of (A) three (3) multiplied by (B) the
sum of (i) the Executive’s Annual Base Salary, and (ii) the Severance Incentive;
and
 
5.1.1.4   an amount equal to the sum of (A) the balance of the Executive’s
accounts forfeited under the Company’s Savings Investment Plan, or any successor
plan, if applicable (“SIP”) and the Nicor Gas Supplementary Savings Plan
(“SSIP”) as a result of termination of employment, and (B) the sum of (i) the
aggregate maximum matching contributions which the Company would have made on
behalf of the Executive to the SIP and the SSIP for the Severance Period,
calculated as if the amount payable under subsection 5.1.1.3 of this Agreement
had been earned equally over the Severance Period and the Executive had made the
maximum allowable voluntary contributions to the SIP and SSIP, and (ii) the
aggregate additional “retirement growth” contributions, if any, which the
Company would have made on behalf of the Executive for the Severance Period to
the SIP and SSIP if the amount payable under subsection 5.1.1.3 of this
Agreement had been earned equally over the Severance Period.  For purposes of
calculating the amount that would be contributed to the SIP and SSIP for the
Severance Period under this Section 5.1.1.4(B), the limits contained in the plan
documents and Internal Revenue Code Sections 415, 402(g) and 401(a)(17), for the
year of termination shall apply.
 
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 Separation from Service 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 Separation from Service (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
Separation from Service, except for an amendment adopted in accordance with
Section 11.7 of this Agreement and that by its specific terms amends this
Agreement.
 
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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 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, deferred dividends, 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).  Notwithstanding the
foregoing, to the extent such awards are subject to performance criteria, a
prorated calculation of the target value of such awards shall be performed and
forfeiture conditions shall lapse only with respect to the portion of such
awards attributable to such prorated value.
 
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.  All such benefit payments
shall be made no later than December 31 of the year following the year in which
the expense was incurred.  The amount of benefits provided in one year shall not
affect the amounts provided in any subsequent year.  Such benefits shall not be
subject to liquidation or exchange for another benefit.  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
 
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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 5.1.1.3
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.
 
5.1.7   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 5.1.1.3 of this Agreement.
 
5.1.8   During the Severance Period, 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
services.  The amount of expenses incurred in one year shall not affect the
amounts paid in any subsequent year.
 
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), 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 or Nicor Gas, as applicable, terminates the
Executive’s employment by reason of
 
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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, and 5.1.1.2, 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.
 
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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.
 
6.1.3   All determinations by the Company’s auditors under this Section 6.1
shall be made using reasonable good faith interpretations of the Code, the
regulations and other guidance issued thereunder.
 
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
 
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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
 
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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),
 
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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
 
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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.
 
6.8.   Payments.  All amounts payable to Executive under Section 6.1, 6.3 or 6.6
shall be paid as soon as practicable after a Change in Control or other event
giving rise to any payment of the Excise Tax by the Executive, but no later than
the December 31 of the year next following the year in which the Executive, or
the Company on behalf of the Executive, remits the Excise Tax.
 
ARTICLE VII
EXPENSES AND INTEREST
 
7.1.   Legal Fees and Other Expenses.
 
7.1.1   During the Employment Period and for a period of ten (10) years
following the Termination Date, 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), then 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.  All such expenses shall be reimbursed by December
31 of the year following the year in which the expense was incurred.  The amount
of expenses reimbursed in one year shall not affect the amount eligible for
reimbursement in any subsequent year.
 
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.  Except for any required delay under Section 11.16, 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
 
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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.  To the
extent Executive receives severance or similar payments and/or benefits under
any other plan, program, agreement, policy, practice, or the like of Nicor Gas,
the Company or any Subsidiary, or under the WARN Act or similar state law, the
payments and benefits due to Executive under this Agreement will be
correspondingly reduced on a dollar-for-dollar basis (or vice-versa).
 
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
Subsidiary 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 Subsidiary.  Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan
of the Company or any Subsidiary 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
 
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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.
 
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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:
 
Rocco J. D’Alessandro
2178 Fargo Blvd.
Geneva, IL 60134

If to the Company:
 
Nicor Inc.
1844 Ferry Road
Naperville, Illinois 60563-9600
Attn:  Claudia J. Colalillo
 
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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.  No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not expressly set forth in this Agreement.  This Agreement supersedes the Prior
Agreement, which shall no longer be in force or have any effect.
 
11.16.  Section 409A Compliance.
 
11.16.1  To the extent applicable, this Agreement shall be interpreted in
accordance with Internal Revenue Code Section 409A and Department of Treasury
regulations and other interpretive guidance issued thereunder.  If the Company
determines that any compensation or benefits payable under this Agreement do not
comply with Code Section 409A and related Department of Treasury guidance, the
Company and Executive agree to amend this Agreement or take such other actions
as the Company deems necessary or appropriate to comply with the requirements of
Code Section 409A while preserving the economic agreement of the parties.
 
11.16.2      Notwithstanding any provision to the contrary in this Agreement, if
Executive is deemed at the time of his separation from service to be a
“specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, to
the extent delayed commencement of any portion of the benefits to which
Executive is entitled under Section 5.1 or 5.4 of this Agreement
 
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is required in order to avoid a prohibited distribution under Section
409A(a)(2)(B)(i) of the Code, such portion of the benefits payable to Executive
under Section 5.1 or 5.4 shall not be paid prior to the earlier of (a) the
expiration of the six-month period measured from the date of Executive’s
Separation from Service or (b) Executive’s death.  Upon the expiration of the
applicable Code Section 409A(a)(2)(B)(i) deferral period, all payments deferred
pursuant to this Section 11.16 shall be paid in a lump sum and any remaining
payments due under the Agreement shall be paid as otherwise provided
herein.  Notwithstanding anything herein to the contrary, to the maximum extent
permitted by applicable law, amounts payable to Executive pursuant to Sections
5.1 or 5.4 herein shall be made in reliance upon Treas. Reg. Section
1.409A-1(b)(9) (Separation Pay Plans) or Treas. Reg. Section 1.409A-1(b)(4)
(Short-Term Deferrals) and such amounts shall not be delayed pursuant to this
Section 11.16.2.
 
IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement
as of the date first above written.
 
                  /s/ ROCCO J. D'ALESSANDRO
                   Rocco J. D’Alessandro

                   Nicor Inc.

                   By: /s/ RUSS M. STROBEL
                    Russ M. Strobel
                    Chairman, President and Chief Executive Officer

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