Nicor Inc.
                                                                      Form 10-Q
                                                                  Exhibit 10.06


                 IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
                      COUNTY DEPARTMENT, CHANCERY DIVISION

IN RE NICOR INC. SHAREHOLDER        )     No. 02 CH 15499
DERIVATIVE LITIGATION               )
                                    )     Honorable Sophia H. Hall
                                    )     Judge Presiding.
                                    )

                    STIPULATION AND AGREEMENT OF SETTLEMENT

      The Settling Parties,1 by and through their undersigned attorneys, hereby
enter into the following Stipulation and Agreement of Settlement (the
"Settlement" or "Stipulation"), dated as of February 16, 2005, subject to the
approval of the Court.
                                    RECITALS
      WHEREAS, on or after August 23, 2002, the Plaintiffs filed derivative
actions in the Circuit Court of Cook County, Illinois (the "Court") on behalf
of Nicor Inc., which is named as a nominal party, against the Settling
Defendants, entitled Charles Dolnick v. Robert M. Beavers, et al., No. 02 CH
15499, Kokeng Tan v. Thomas L. Fisher, et al., No. 02 CH 16477, and Joseph
Pirolli v. Thomas L. Fisher, et al., No. 02 CH 17642, alleging claims against
the Settling Defendants for breach of fiduciary duty and various other causes
of action; and
      WHEREAS, by Order dated December 27, 2002, the Court consolidated these
derivative actions into a single consolidated action captioned as In re Nicor
Inc. Shareholder Derivative Litigation, No. 02 CH 15499 (the consolidated action
is referred to herein as the "Action"); and
      WHEREAS, On February 26, 2003, Defendants moved to dismiss, based on
Defendants' contention that Plaintiffs had not adequately pled "demand
futility," which is required in a shareholder derivative action; and

_______________________
1   All capitalized terms not otherwise defined shall carry the meaning as set
    forth in Section 1 below.
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<PAGE>


      WHEREAS, on March 12, 2003, pursuant to Plaintiffs' motion, the Court
granted Plaintiffs leave to amend the complaint and Plaintiffs' Consolidated
Second Amended Derivative Complaint was filed on April 15, 2003; and
      WHEREAS, on May 8, 2003, Defendants filed a motion to dismiss Plaintiffs'
Consolidated Second Amended Derivative Complaint, again based on demand
futility; and
      WHEREAS, Plaintiffs served a discovery request on May 30, 2003 and on July
9, 2003, pursuant to Defendants' motion, the Court entered an Order staying
discovery while defendants' motion to dismiss was pending; and
      WHEREAS, Defendants' motion to dismiss Plaintiffs' Consolidated Second
Amended Derivative Complaint was fully briefed and oral argument was presented
on July 22, 2003, after which the Court took the matter under advisement; and
      WHEREAS, on October 7, 2003, the Court delivered its ruling in open court,
granting Defendants' motion to dismiss and, pursuant to Plaintiffs' oral motion,
and over Defendants' objection, the Court granted Plaintiffs leave to file an
amended complaint; and
      WHEREAS, on November 7, 2003, the Plaintiffs filed their Consolidated
Third Amended Complaint for Breach of Fiduciary Duty and Unjust Enrichment; and
      WHEREAS, on December 8, 2003, Defendants again moved to dismiss based on
the issue of demand futility, Defendants' motion was fully briefed thereafter,
oral argument was presented on January 20, 2004, and the Court took the matter
under advisement; and
      WHEREAS, on March 26, 2004, the Court delivered its ruling in open court,
denying Defendants' motion to dismiss Plaintiffs' Consolidated Third Amended
Derivative Complaint and lifted the prior Order staying discovery; and

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      WHEREAS, Plaintiffs' Co-Lead Counsel and their designees have investigated
the claims and allegations asserted in the Action, as well as the facts and
circumstances relevant to the Action; and
      WHEREAS, Plaintiffs' Co-Lead Counsel and their designees have closely
monitored relevant regulatory proceedings (before the Illinois Commerce
Commission) and related litigation (Singer v. Nicor, Inc., No. 02 C 5168,
N.D. Ill.) and have continued to research the law and facts underlying the
claims asserted; and
      WHEREAS, the parties executed an Agreed Protective Order, which was
approved and entered by the Court on April 12, 2004, and, shortly thereafter,
Defendants produced a copy of over 100,000 documents that had been produced in
Singer; and
      WHEREAS, Defendants filed an Answer on May 14, 2004;
      WHEREAS, after the Court's ruling sustaining the complaint, Defendants
argued that discovery should be bifurcated with discovery initially limited to
evidence regarding demand futility, and Defendants also indicated that they
intended to raise the issue of demand futility again, in a future motion for
summary judgment; and
      WHEREAS, on June 15, 2004, pursuant to the Court's Order, the parties
simultaneously submitted Case Management proposals and memoranda with respect to
Defendants' motion to bifurcate and limit discovery, on June 18, 2004, the
parties presented oral argument regarding discovery during an extended Case
Management Conference and, on June 18, 2004, the Court ruled that Defendants
must produce all "readily available discovery," i.e., the discovery already
produced in the related proceedings (i.e., Singer, the ICC proceedings and an
SEC investigation), plus the minutes, agendas and documents related to meetings
of Nicor's Board and its committees; and

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      WHEREAS, in June 2004, Defendants produced documents related to meetings
of the Board of Directors and its committees and in July 2004, Defendants
produced approximately 30 boxes of documents from the related proceedings (ICC
proceedings and SEC investigation); and
      WHEREAS, Defendants declined to produce other discovery from the ICC
proceedings based on a "Proprietary Agreement," i.e., Protective Order, covering
"confidential" documents produced in the ICC proceedings; and
      WHEREAS, in response, Plaintiffs obtained an Order entered on October 20,
2004, by the ALJs in the ICC proceedings granting Plaintiffs' request for access
to the discovery from the ICC proceedings that Defendants were withholding; and
      WHEREAS, thereafter, Defendants produced thousands of additional
documents, including transcripts from depositions taken in the ICC proceedings
and notes from interviews conducted during an investigation of the conduct
related to Plaintiffs' allegations; and
      WHEREAS, in total, the discovery produced consisted of over 170,000 pages
of documents, including transcripts from 17 depositions; and
      WHEREAS, beginning in April 2004, the parties engaged in settlement
discussions; and
      WHEREAS, on April 27, 2004, Nicor issued a press release announcing a $29
million settlement with its primary Directors and Officers Insurance Policy
carrier, including the following statement:

      The $29 million is to be used to satisfy company directors' and officers'
      liabilities and expenses associated with claims asserted against them in a
      securities class action [Singer], a shareholder derivative action, or
      related matters, with any remaining balance to be paid to the company....
      The company also continues to seek recovery from its other D&O insurance
      carrier for additional amounts in connection with the same matters.

      WHEREAS, in May 2004, Plaintiffs presented Defendants with a formal
written demand and in November 2004, the parties agreed to enter into mediation
and thereafter, Defendants presented a formal written counter-offer to
Plaintiffs' previous proposal; and

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      WHEREAS, as part of the parties' agreement to enter into mediation, they
also agreed that there would be no new discovery, including depositions; and
      WHEREAS, on January 11, 2005, the parties and their counsel participated
in a full-day mediation and arm's length negotiation in Chicago, facilitated by
Eric Green, a highly regarded and experienced independent mediator who is also a
Professor at Boston University School of Law, and founder of the Boston-based
mediation firm, Resolutions, LLC; and
      WHEREAS, at the end of the January 11, 2005 mediation session, the parties
entered into an agreement, the terms of which were thereafter incorporated
(following negotiations) into a "Term Sheet" that was approved by Nicor's Board
of Directors on January 20, 2005; and
      WHEREAS, on January 25, 2005, Nicor issued a press release announcing that
a settlement had been reached, subject to court approval, and outlining its
terms; and
      WHEREAS, the Settling Defendants vigorously deny each and every one of the
claims and contentions alleged by Plaintiffs in the Action and expressly deny
all charges of wrongdoing or liability against them arising out of any of the
conduct, statements, acts, or omissions alleged, or that could have been
alleged, in the Action, including, but not limited to any claims that the
Settling Defendants breached their fiduciary duties to Nicor or its
Shareholders, and any claims that the Settling Defendant unjustly enriched
themselves at the expense or detriment of Nicor or its Shareholders. Each of the
Settling Defendants further asserts that at all material times, he or she acted
in good faith and in a manner he or she reasonably believed to be in the best
interests of Nicor and its Shareholders. This Stipulation shall not be construed
or deemed to be an admission by any Settling Defendant of any liability or
wrongdoing; and
      WHEREAS, the Action has been vigorously litigated by the Settling Parties
for over two years and Plaintiffs' Co-Lead Counsel and their designees
vigorously pursued their investigation and the discovery supporting their
claims; and

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       WHEREAS, Plaintiffs believe that the claims asserted in the Action have
merit, they also believe that the Settlement provided for herein is fair,
reasonable, adequate, and proper because it provides substantial benefits to the
Company and its stockholders when weighed against the attendant risks of
continued litigation, including the possibility that the Court would determine
that the Action was not properly brought as a derivative action or that the
Settling Defendants had not breached their fiduciary duties; and
      WHEREAS, the Nicor Board of Directors has approved the terms of this
Settlement and has concluded that it is in the best interests of the Company;
      NOW THEREFORE, in consideration of the promises and agreements, covenants,
representations, and warranties set forth herein, intending to be legally bound;
      IT IS HEREBY STIPULATED AND AGREED, by and among the Settling Parties,
that this Action and all Released Claims are settled and compromised and that
the Action shall be dismissed with prejudice and without costs, subject to
approval of the Court pursuant to 805 ILCS 5/7.80(c), on the following terms and
conditions:
                             ADDITIONAL DEFINITIONS

      1. The following additional definitions shall apply in this Stipulation:
           (a) "Final Judgment" means that judgment to be entered by the Court,
      substantially in the form of Exhibit C hereto, approving the Settlement,
      dismissing the Action with prejudice and without costs to any party except
      as provided herein, releasing all Released Claims.
           (b) "Plaintiffs" means Charles Dolnick, Kokeng Tan and Joseph
      Pirolli.
           (c) "Plaintiffs' Co-Lead Counsel" means Robert D. Allison &
      Associates, Emerson Poynter LLP, and Robbins Umeda & Fink LLP.

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           (d) "Plaintiffs' Co-Liaison Counsel" means David B. Kahn & Associates
      and the Law Office of Patrick J. Sherlock.
           (e) "Settling Defendants" means Robert M. Beavers, Bruce P. Bickner,
      John H. Birdsall III, Thomas A. Donohoe, Thomas L. Fisher, John E. Jones,
      Dennis J. Keller, William A. Osborne, John Rau, John F. Riordan, Patricia
      A. Weir, and Kathleen L. Halloran.
           (f) "Released Parties" means the Settling Defendants and each of
      their respective agents, insurers, attorneys, advisors, successors, heirs,
      assigns, executors, personal representatives, and immediate families.
           (g) "Released Claims" means any and all claims, rights, demands,
      causes of action, suits, matters, and issues of every kind and nature
      whatsoever, including, but not limited to, those arising under contract,
      statute, or common law, that have been or could have been asserted by
      Nicor or by Shareholders suing derivatively on behalf of Nicor (i) in
      Plaintiffs' Consolidated Third Amended Complaint or (ii) based on the
      facts, transactions, or occurrences (including omissions) alleged in any
      of the complaints filed in this Action.
           (h) "Settlement Effective Date" means the date upon which the Final
      Judgment is no longer subject to appeal or review (or further appeal or
      review), whether by exhaustion of any possible appeal, lapse of time, or
      otherwise.
           (i) "Settling Parties" means Plaintiffs, the Settling Defendants, and
      Nicor.
           (j) "Nicor" or the "Company" means Nicor Inc. and its subsidiaries
      and affiliates.
           (k) "Shareholder" means a current holder of Nicor common stock as of
      the date that the Notice described below in paragraph 10 is mailed.

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                         SCOPE AND EFFECT OF SETTLEMENT

      2. The obligations incurred pursuant to this Stipulation shall be in full
and final disposition of any and all Released Claims against all Released
Parties.
      3. Upon the Settlement Effective Date, Plaintiffs, on behalf of
themselves, Nicor, any other Shareholder, and each of their heirs, executors,
administrators, successors, and assigns and any person they represent, and Nicor
shall release and forever discharge the Released Parties for the claims asserted
in the Action, and shall forever be enjoined from prosecuting, each and every
Released Claim against any of the Released Parties. By expressly releasing and
forever discharging all Released Claims against the Released Parties,
Plaintiffs, Shareholders, and Nicor expressly waive any and all provisions,
rights, and benefits conferred by ss. 1542 of the California Civil Code which
provides:

         A general release does not extend to claims which the creditor does
         not know or suspect exist in his favor at the time of executing the
         release, which if known by him must have materially affected his
         settlement with the debtor.

and any other law of any jurisdiction (domestic or foreign), or principle of
common law, which is similar, comparable, or equivalent to said provision.
      4. Upon the Settlement Effective Date, each of the Settling Parties shall
be deemed to have, and by operation of the Final Judgment shall have, fully,
finally, and forever released, relinquished, and discharged each other, each
Shareholder, Plaintiffs, and Plaintiffs' Counsel from all claims relating to,
arising out of, or connected with the institution, prosecution, assertion,
settlement, or resolution of the Action and/or the Released Claims.

                             TERMS OF THE SETTLEMENT

      5. Subject to the provisions hereof, within five business days after the
Settlement Effective Date, the Corporate Governance Guidelines adopted by the
Board of Directors of Nicor will be amended to provide that:

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         (a) a minimum of two-thirds of the Board of Directors shall be
      "independent," as defined therein, at all times;
         (b) the definition of "independence," as set forth in Section A.2. of
      the Corporate Guidance Guidelines, will be amended as follows: (i) the
      required period of non-employment by the Company, as set forth in Section
      A.2.ii., shall be increased from three years to five years; (ii) the limit
      on direct compensation from the Company (excluding Directors and committee
      fees and pensions or other forms of deferred compensation not contingent
      on continued services), as set forth in Section A.3.iii., shall be
      decreased from $100,000 to $75,000; and (iii) the required period of
      non-affiliation with the Company's auditors, as set forth in Section
      A.2.iv., shall be increased from three years to five years;
         (c) the lead partner on the Company's audit engagement will be
      rotated off the engagement within three years after the conclusion of the
      audit of the Company's 2004 financial statements and every three years
      thereafter;
         (d) Directors who are employed full-time will be limited to serving
      on a total of no more than five boards of publicly traded companies, while
      Directors who are retired will be limited to serving on a total of no more
      than seven boards of publicly traded companies (including the Nicor
      Board);
         (e) the required number of meetings of the independent directors in
      executive sessions and outside of the presence of management Directors and
      management, as set forth in Section C.4., shall be increased from one to
      three times per year. Such meetings shall be led by the Lead Outside
      Director;
         (f) the Chief Compliance Officer will make quarterly reports to the
      Board and to Nicor's General Counsel concerning Nicor and Nicor Gas'
      compliance with their

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      regulatory obligations to the Illinois Commerce Commission ("ICC") and the
      adequacy of their ICC disclosures.  Specifically, the issues to be
      discussed include whether (i) all of the information disclosed is accurate
      and (ii) if there is any additional information that the ICC might
      reasonably want to know that is related to the activities under the ICC's
      regulatory authority;
         (g) as part of the Directors' orientation and continuing professional
      development, as set forth in Section F, the current Directors will receive
      additional training on regulatory compliance and accounting issues. This
      additional training will be added to the orientation program provided to
      new Directors; and
         (h) the provisions set forth in paragraphs (a)-(g) above shall remain
      in effect for a minimum of three years from the Settlement Effective Date,
      after which time the Board of Directors shall have the discretion to alter
      them as it would any other corporate governance provisions in light of
      experience and circumstances. Notwithstanding the foregoing, nothing in
      this Settlement shall prevent the Company from altering these provisions
      at an earlier point in time if necessary to comply with New York Stock
      Exchange rules or regulations, Securities and Exchange Commission rules,
      regulations, or standards, or any other applicable law.
         6. The Settling Parties agree that the filing and prosecution of the
      Action was a meaningful factor in each of the following:
            (a) the implementation of changes in corporate governance
         policies and internal controls that Nicor has instituted since the
         derivative actions were filed in August 2002;

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            (b) personnel changes Nicor has made, including terminations,
         resignations, and the creation of new positions, since the derivative
         actions were filed in August 2002;
            (c) the $29 million paid into escrow on May 11, 2004 by the
         Settling Defendants' primary D&O insurer relating to its coverage
         obligation for (among other things) the settlement in Singer v. Nicor
         Inc., No. 02 C 5168 and the Action; and
            (d) the $4 million that the Settling Defendants' excess D&O
         insurer has agreed to pay to Nicor in connection with the settlement
         of this Action to settle certain claims asserted against the insurer
         arising out of both the Singer settlement and the settlement of the
         Action.
      7. Defendants agree to pay to the three Co-Lead Plaintiffs' Counsel for
distribution to all Plaintiffs' counsel $3.5 million for attorneys' fees and
reimbursement of all expenses incurred in the Litigation as a unitary part of
the settlement, such payment to be made out of insurance proceeds within five
business days after the Settlement Effective Date; however, if there are no
objectors to any aspect of the Settlement, such payment shall be made within
five business days after the Court's entry of a final order in substantially the
form attached hereto as Exhibit C approving the Settlement, subject to the
agreement of Co-Lead Plaintiffs' Counsel to reimburse the Company for the
amounts paid, including any interest Co-Lead Plaintiffs' Counsel have earned on
those amounts, in the event that the settlement is challenged and overturned on
appeal. If there are any disputes over the distribution or allocation of
attorneys' fees and/or expenses between or among Plaintiffs' Counsel, those
disputes shall be mediated, but if not resolved, decided by the Court.

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      8. After the Settlement Effective Date and after the payment required by
paragraph 7 hereof has been made, the escrow established in connection with the
$29 million payment from the Settling Defendants' D&O insurer, referred to
above, shall be terminated and the balance in that escrow account shall be
transferred to Nicor.
                                     NOTICE

      9. Notice, in substantially the form annexed hereto as Exhibit A, shall
be mailed by United States mail, postage pre-paid, no more than seven (7) days
after entry of the Preliminary Approval Order to all persons who hold Nicor
common stock as of the mailing date, as set forth in the records maintained by
or on behalf of Nicor, at their respective addresses set forth in such records.
Nicor shall use reasonable efforts to give notice of the Fairness Hearing to
beneficial owners of shares by making additional copies of the notice available
to any record holder requesting them for distribution to beneficial owners.
Nicor shall be solely responsible for the cost of providing Notice.

                              PRELIMINARY APPROVAL

      10. As soon as practicable after execution of this Stipulation, the
Settling Parties shall move the Court for preliminary approval of the
Settlement. Counsel for the Settling Parties shall apply to the Court for an
order substantially in the form set forth in Exhibit B hereto:
          (a) preliminarily approving the Settlement as fair, reasonable, and
      adequate to Nicor and its Shareholders;
          (b) setting March 29, 2005, at 2:00 p.m., as the date for a hearing
      (the "Fairness Hearing") to determine whether the proposed Settlement set
      forth herein should be finally approved as fair, reasonable, and adequate
      to Nicor and its Shareholders;
          (c) approving the form of notice set forth in Exhibit A hereto,
      distributed in the manner described in paragraph 9 of this Stipulation;

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          (d) finding that, as set forth in the Notice, any Shareholder may
      appear and show cause if he, she, or it has any information why the
      proposed Settlement of the Action should not be approved as fair,
      reasonable, and adequate, or why a judgment should not be entered thereon;
      provided, however, that, unless otherwise ordered by the Court, no
      Shareholder may appear at the Fairness Hearing or contest the approval of
      the terms and conditions of the Settlement unless his, her, or its
      objection or opposition, including the basis therefore, together with a
      sworn statement that the person or entity making the objection in
      opposition is a current Shareholder of Nicor, is made in writing, filed
      with the Court, and mailed by first-class mail postmarked no later than
      fourteen (14) days before the Fairness Hearing to Plaintiffs' Co-Lead
      Counsel, which will promptly provide copies of such documents to Counsel
      for the Settling Defendants and Nicor; and
          (e) finding that the distribution of the Notice as provided for in
      paragraph 9 of this Stipulation constitutes the best notice practicable
      under the circumstances and meets all of the requirements of due process
      and 805 ILCS 5/7.80(c).

                                 FINAL JUDGMENT

      11. Should the Court approve of the Settlement on the terms set forth in
this Stipulation, a Final Judgment, substantially in the form annexed as Exhibit
C hereto, shall be entered, among other things:
          (a) finding that the dissemination of the Notice as described above
      has been accomplished as directed and has provided the best notice
      practicable under the circumstances and has met all requirements of due
      process;
          (b) approving the Settlement as fair, reasonable, and adequate to
      Nicor and its Shareholders; and

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          (c) completely discharging, settling, dismissing with prejudice,
      releasing, and permanently barring and enjoining the assertion,
      prosecution, or continuation by or on behalf of Plaintiffs, Nicor, or any
      Shareholder of any Released Claim against each and every Released Party;
      provided, however, that the Final Judgment shall not bar any action or
      claim to enforce the terms of the Settlement as approved by the Court or
      the Final Judgment.

                      CONTINGENCIES, EFFECT OF DISAPPROVAL
                          OR TERMINATION OF SETTLEMENT

      12. This Settlement and the consideration therefor are given by the
Settling Defendants in return for, and are contingent upon, a full and complete
release of all Released Claims against all Released Parties, which release no
longer may be challenged by Plaintiffs, any Shareholder, or Nicor.
      13. In the event that the Court or, in the event of an appeal, any
appellate court having jurisdiction over the Action refuses to approve, or
materially modifies this Stipulation or any order entered pursuant thereto, then
counsel for any of the Settling Parties may terminate this Stipulation and the
Settlement by giving counsel for all other Settling Parties written notice of
the termination no later than ten (10) days following the date of the event
giving rise to the right of termination.
      14. This Settlement and the obligations of the Settling Parties are
conditioned upon and subject to:
          (a) entry of an order substantially in the form of Exhibit B
      preliminarily approving the Settlement;
          (b) entry of the Final Judgment substantially in the form of Exhibit
      C; and
          (c) the occurrence of the Settlement Effective Date.

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      15. In the event that this Stipulation is not approved by the Court, or
such approval is reversed on appeal, or the Settlement provided herein is
otherwise terminated as provided for herein, this Stipulation shall become null
and void and of no further force and effect, and shall not be used or referred
to for any purpose whatsoever. In such event, the Settling Parties shall move
the Court for an order vacating all orders previously entered relating to this
Stipulation, and this Stipulation and all negotiations and proceedings relating
thereto shall be deemed to be without prejudice as to the rights of any and all
parties hereto, who shall be restored, to the extent possible, to their
respective positions existing as of the date this Stipulation is executed.

                         STIPULATION IS NOT AN ADMISSION

      16. Settling Defendants have denied, and continue to deny, that they have
committed any breach of fiduciary duty or have been unjustly enriched, and have
denied and continue to deny all allegations of wrongdoing or liability
whatsoever with respect to the Released Claims, including any and all contested
facts or claims alleged in the Action. Settling Defendants further deny that the
Action was properly brought as a derivative action, or that Plaintiffs have
shown that demand was excused.
      17. Neither this Stipulation nor any of its terms (nor any agreement or
order relating thereto), nor any payment or consideration provided for herein,
is or shall be construed as an admission by any of the Settling Defendants of
any fault, wrongdoing, or liability whatsoever, or an admission by any of the
Plaintiffs of any lack of merit of their claims against the Settling Defendants.
Neither this Stipulation nor any of its terms (nor any agreement or order
relating thereto), nor any payment or consideration provided for herein, shall
be deemed or offered or received in evidence in any civil, criminal,
administrative, or other proceeding or utilized in any manner whatsoever,
including as a presumption, a concession, or an admission of any fault,
wrongdoing, or liability whatsoever on the part of any Settling Defendant;
provided, however,

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<PAGE>

that nothing contained in this paragraph shall prevent the Stipulation (or any
agreement or order relating thereto) from being used, offered, or received in
evidence in any proceeding to approve, enforce, or otherwise effectuate the
Settlement (or any agreement or order relating thereto) or the Final Judgment,
or in which the reasonableness, fairness, or good faith of the Settling
Defendants in participating in the Settlement (or any agreement or order
relating thereto) is at issue, or to enforce or effectuate provisions of this
Settlement as to the Settling Parties.

                                  MISCELLANEOUS

      18. All counsel who execute this Stipulation represent and warrant that
they have authority to do so on behalf of their respective clients.
      19. The Settling Parties and all signatories to this Stipulation agree to
undertake and to use their best efforts, including all steps contemplated by
this Stipulation and any other steps and efforts that may become necessary by
order of the Court or otherwise, to effectuate this Stipulation and the
Settlement contemplated hereunder.
      20. This Stipulation (including exhibits hereto, agreements referenced
herein, and documents executed pursuant to the foregoing) contains the entire
agreement among the Settling Parties with respect to the subject matter hereof
and supersedes any prior written or oral agreements, representations,
warranties, or statements. No representation, warranty, or inducement has been
made to any party concerning this Stipulation other than the representations,
warranties, and covenants contained herein. This Stipulation may not be altered,
modified, or amended, or any of its provisions waived, unless by a writing
executed by counsel for all the Settling Parties hereto.
      21. Plaintiffs and Plaintiffs' Counsel expressly warrant that, in entering
into this Stipulation, they relied solely upon their own knowledge and
investigation, and not upon any

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promise, representation, warranty, or other statement by the Settling Defendants
not expressly contained herein.
      22. This Stipulation may be executed in one or more counterparts, all of
which shall be considered the same as if a single document shall have been
executed, and shall become effective when such counterparts have been signed by
each of the Settling Parties and delivered to each of the other Settling
Parties.
      23. Upon prior notice to the Court and after approval by the Court, the
Settling Parties may agree to reasonable extensions of time to carry out any of
the provisions of this Stipulation, as contemplated in the attached exhibits,
incorporated herein by reference.
      24. The failure of any Settling Party to enforce at any time any provision
of this Stipulation shall not be construed to be a waiver of such provision, nor
in any way to affect the validity of this Stipulation or any part hereof or the
right of any Settling Party thereafter to enforce each and every such provision.
No waiver of any breach of this Stipulation shall be held to constitute a waiver
of any other breach.
      25. The Court shall retain jurisdiction with respect to the enforcement of
the terms of this Stipulation and the Settlement embodied herein.
      26. The section headings used throughout this Stipulation are for
convenience only and shall not affect the interpretation or construction of this
Stipulation.
      27. In the event that the Court or any other court is called upon to
interpret this Stipulation, no one party or group of parties shall be deemed to
have drafted this Stipulation, nor may any party offer in evidence or otherwise
use, for purposes of suggesting any interpretation of this Stipulation, any
prior drafts of this Stipulation.
      28. Nothing in this Stipulation, the Settlement, or the negotiations or
proceedings relating to the foregoing is intended to be or shall be deemed to
constitute a waiver of any

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applicable privilege or immunity, including without limitation, the accountants'
privilege, the attorney-client privilege, the joint defense privilege, or work
product immunity.
      29. This Stipulation and the Settlement contemplated hereby shall be
governed by, and construed in accordance with, the laws of the State of Illinois
and, to the extent required to obtain and enforce the complete release and
injunction anticipated under paragraph 11 hereof, such foreign laws as may be
applicable thereto.

Dated:  February 16, 2005

/s/ ROBERT D. ALLISON
-----------------------------
Robert D. Allison
Steven P. Schneck
Robert D. Allison & Associates
122 South Michigan Ave.
Chicago, Illinois 60603

/s/ SCOTT E. POYNTER
-----------------------------
John G. Emerson
Scott E. Poynter
Emerson Poynter LLP
2228 Cottondale Ave., Suite 100
Little Rock, AR 72202

/s/ MARC UMEDA
-----------------------------
Brian J. Robbins
Marc Umeda
Robbins Umeda & Fink LLP
610 West Ash Street
Suite 1800
San Diego, CA 92101

Co-Lead Counsel for Plaintiffs


David B. Kahn
David B. Kahn & Associates Ltd.
One Northfield Plaza
Suite 100
Northfield, Illinois 60093

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<PAGE>

Patrick J. Sherlock
11 South LaSalle Street
Suite 1600
Chicago, Illinois 60603

Co-Liaison Counsel for Plaintiffs


/s/ MICHELE ODORIZZI
-----------------------------
Hugh R. McCombs
Michele Odorizzi
Michael K. Forde
MAYER, BROWN, ROWE & MAW LLP
190 S. LaSalle Street
Chicago, Illinois 60603


Counsel for Individual Defendants Robert M. Beavers,
Bruce P. Bickner, John H. Birdsall III, Thomas A. Donahoe,
Thomas L. Fisher, John E. Jones, Dennis J. Keller,
William A. Osborn, John Rau, John F. Riordan Patricia A. Weir,
and Kathleen L. Halloran


/s/ MICHAEL D. SHER
--------------------------------
Michael D. Sher
Maria J. Minor
NEAL, GERBER & EISENBERG LLP
Two North LaSalle Street
Suite 2300
Chicago, Illinois 60602


Counsel for Nicor Inc.

<PAGE>

                                                                      Exhibit A


                      NOTICE OF HEARING ON PROPOSED SETTLEMENT
                         OF SHAREHOLDER DERIVATIVE ACTION

TO:   ALL PERSONS WHO PRESENTLY OWN NICOR INC. ("NICOR") COMMON STOCK

THIS NOTICE RELATES TO A PROPOSED SETTLEMENT OF A SHAREHOLDER DERIVATIVE ACTION
AND CLAIMS ASSERTED THEREIN.  SHAREHOLDER RIGHTS MAY BE AFFECTED BY THIS
SETTLEMENT.

      This Notice is being provided pursuant to 805 ILCS 5/7.80(c) and an Order
of the Circuit Court of Cook County, Illinois (the "Court"), following the
execution of a Stipulation and Agreement of Settlement signed by the parties on
February 16, 2005 (the "Stipulation"). The purpose of this Notice is to inform
you of the proposed settlement (the "Settlement") of a shareholder derivative
action and of the hearing to be held by the Court to consider the fairness,
reasonableness, and adequacy of the Settlement. This Notice describes the rights
you may have in connection with the Settlement. This Notice is not an expression
of any opinion by the Court about the merits of any of the claims or defenses
asserted by any party in the Action or the fairness, reasonableness, or adequacy
of the Settlement.

      A Fairness Hearing will be held on March 29, 2005 at 2:00 p.m., before the
Honorable Sophia H. Hall, at the Circuit Court of Cook County, Courtroom 2301,
Richard J. Daley Center, 50 West Washington Street, Chicago, Illinois 60602, to
(i) determine whether the Settlement should be approved as fair, reasonable, and
adequate and (ii) address any other matters that come before the Court.

I.    THE ACTION

      Beginning on August 23, 2002, three separate shareholder derivative
actions were filed in the Court on behalf of Nicor Inc., which is named as a
nominal party only. All three actions alleged that the Settling Defendants, who
are officers and directors of Nicor, breached their fiduciary duties to Nicor,
in connection with Nicor's financial reporting, Nicor Gas' initiation and
implementation of its Gas Cost Performance Program during the years 1999-2002,
and Nicor's supervision of its 50% ownership interest in Nicor Energy LLC. On
December 27, 2002, the Court issued an Order consolidating the three actions
pending in this Court. The consolidated action is referred to herein as the
"Action."

      Over the past 2 1/2 years, Plaintiffs' Co-Lead Counsel and their designees
thoroughly investigated the claims and studied more than 170,000 documents and
17 depositions. Multiple consolidated and amended complaints were filed, and the
parties briefed and argued several motions on the pleadings and motions related
to discovery. Numerous hearings were held in the Action involving motions to
dismiss, status conferences, and discovery. On March 26, 2004, the Court denied
Defendants' motion to dismiss Plaintiffs' Consolidated Third Amended Complaint,
and ordered discovery to follow. Plaintiffs' Counsel committed substantial
expenses and resources in developing the information and studying the documents
produced. To that end, Plaintiffs' Co-Lead Counsel developed a detailed
mediation statement for an experienced and independent mediator to assist the
parties in negotiating the Settlement.

      If the Court approves the Settlement described herein, upon entry of the
Final

<PAGE>

Judgment and Order of Dismissal, the Action will be dismissed with prejudice.

II.   PLAINTIFFS' DISCOVERY, INVESTIGATION, AND RESEARCH

      Plaintiffs' Co-Lead Counsel and their designees have conducted an
extensive investigation during the development and prosecution of the Action.
This investigation has included, among other things, (i) undertaking
pre-complaint investigation; (ii) researching applicable law with respect to the
claims in the Action and the potential defenses thereto; (iii) monitoring the
related proceedings and investigations and reviewing over 170,000 pages of
documents and a total of 17 deposition transcripts; and (iv) reviewing the
Minutes and Agendas from Nicor's Board of Directors' meetings, and other
documents relating to the Board and its committees.

III.  SETTLING DEFENDANTS' POSITION REGARDING SETTLEMENT

      Settling Defendants vigorously deny each and every one of the claims and
contentions alleged by Plaintiffs in the Action and expressly deny all charges
of wrongdoing or liability against them arising out of any of the conduct,
statements, acts or omissions alleged, or that could have been alleged, in the
Action, including, but not limited to, any claims that the Settling Defendants
breached their fiduciary duties to Nicor or its Shareholders. Each of the
Settling Defendants further asserts that at all material times, he or she acted
in good faith and in a manner he or she reasonably believed to be in the best
interests of Nicor and its Shareholders.

IV.   PLAINTIFFS' POSITION REGARDING SETTLEMENT AND REASONS FOR
      THE SETTLEMENT

      As described above, Plaintiffs' Co-Lead Counsel and their designees have
conducted an extensive investigation relating to the claims and underlying
events alleged in the Action and the benefits that Nicor will realize pursuant
to the Settlement of the Action. Further, Plaintiffs' Co-Lead Counsel have
conducted numerous discussions and arm's length negotiations with counsel for
Defendants with respect to a compromise and settlement of the Action with a view
toward settling all of the issues in dispute and achieving the best relief
possible for Nicor and its shareholders.

      In evaluating the reasonableness and fairness of the Settlement,
Plaintiffs' Co-Lead Counsel weighed the likelihood of success on the claims
asserted in the Action with the risks of continued litigation. While Plaintiffs'
Co-Lead Counsel continue to believe that the claims asserted have substantial
merit, Nicor and the Settling Defendants asserted and would continue to assert
defenses that, if successful, could have precluded Plaintiffs from attempting to
prosecute claims on Nicor's behalf. Further, even if Plaintiffs had prevailed on
any dispositive motion, the Settling Defendants would have asserted legal
defenses at trial that could have precluded Nicor from obtaining any recovery or
other benefits as a result of the Action. Plaintiffs also recognized that even
if a successful result was achieved at trial, such a decision would likely be
appealed, adding further complexity, duration, and uncertainty to the
proceedings in the Action.

      Plaintiffs' Co-Lead Counsel have concluded that the Stipulation terms are
fair, reasonable, and adequate, and have agreed

<PAGE>

to settle the claims made in the Action, pursuant to the terms and provisions of
the Stipulation, after considering (i) the substantial benefits that Nicor will
receive from the Settlement; (ii) the attendant risks of the Action; and (iii)
the desirability of permitting the Settlement to be consummated as provided by
the terms of the Stipulation.

V.    CERTAIN DEFINITIONS USED IN THE STIPULATION AND THE NOTICE

      The Stipulation and this Notice use certain terms and phrases, which are
defined as follows:

      1. "Final Judgment" means a judgment to be entered by the Court approving
the Settlement, dismissing the Action with prejudice and without costs to any
party, releasing all Released Claims, and enjoining Plaintiffs, Nicor
shareholders, or Nicor from instituting, continuing, or prosecuting any action
asserting one or more Released Claims.

      2. "Plaintiffs" means Charles Dolnick, Kokeng Tan, and Joseph Pirolli.

      3. "Plaintiffs' Co-Lead Counsel" means Robert D. Allison & Associates,
Emerson Poynter LLP, and Robbins Umeda and Fink LLP.

      4. "Plaintiffs' Co-Liaison Counsel" means David B. Kahn & Associates and
the Law Office of Patrick J. Sherlock.

      5. "Plaintiffs' Counsel" means Plaintiffs' Co-Lead Counsel and Plaintiffs'
Co-Liaison Counsel.

      6. "Settling Defendants" means Robert M. Beavers, Bruce P. Bickner, John
H. Birdsall III, Thomas A. Donohoe, Thomas L. Fisher, John E. Jones, Dennis J.
Keller, William A. Osborne, John Rau, John F. Riordan, Patricia A. Weir, and
Kathleen L. Halloran.

      7. "Released Parties" means the Settling Defendants and each of their
respective agents, insurers, attorneys, advisors, successors, heirs, assigns,
executors, personal representatives, and immediate families.

      8. "Released Claims" means any and all claims, rights, demands, causes of
action, suits, matters, and issues of every kind and nature whatsoever
including, but not limited to, those arising under contract, statute, or common
law, that have been or could have been asserted by Nicor or by Shareholders
suing derivatively on behalf of Nicor (i) in Plaintiffs' Consolidated Third
Amended Complaint or (ii) based on the facts, transactions, or occurrences
(including omissions) alleged in any of the complaints filed in this Action.

      9. "Settlement Effective Date" means the date upon which the Final
Judgment is no longer subject to appeal or review.

      10. "Nicor" or the "Company" means Nicor Inc. and its subsidiaries and
affiliates.

      11. "Shareholder" means a current holder of Nicor common stock as of the
date of the mailing of this Notice.

VI.   THE SETTLEMENT

      The Settlement has two parts. First, the Board of Directors has agreed to
change the Corporate Governance Guidelines to make the following enhancements:

<PAGE>

      (1) a minimum of two-thirds of the Board of Directors shall be
"independent," as defined therein, at all times;

      (2) the definition of "independence," as set forth in Section A.2. of the
Corporate Guidance Guidelines, will be amended as follows: (i) the required
period of non-employment by the Company, as set forth in Section A.2.ii., shall
be increased from three years to five years; (ii) the limit on direct
compensation from the Company (excluding Directors and committee fees and
pensions or other forms of deferred compensation not contingent on continued
services), as set forth in Section A.3.iii., shall be decreased from $100,000 to
$75,000; and (iii) the required period of non-affiliation with the Company's
auditors, as set forth in Section A.2.iv., shall be increased from three years
to five years;

      (3) the lead partner on the Company's audit engagement will be rotated off
the engagement within three years after the conclusion of the audit of the
Company's 2004 financial statements and every three years thereafter;

      (4) Directors who are employed full-time will be limited to serving on a
total of no more than five boards of publicly traded companies, while Directors
who are retired will be limited to serving on a total of no more than seven
boards of publicly traded companies (including the Nicor Board);

      (5) the required number of meetings of the independent directors in
executive sessions and outside of the presence of management Directors and
management, as set forth in Section C.4., shall be increased from one to three
times per year. Such meetings shall be led by the Lead Outside Director;

      (6) the Chief Compliance Officer will make quarterly reports to the Board
and to Nicor's General Counsel concerning Nicor and Nicor Gas' compliance with
their regulatory obligations to the Illinois Commerce Commission ("ICC") and the
adequacy of their ICC disclosures. Specifically, the issues to be discussed
include whether (i) all of the information disclosed is accurate and (ii) if
there is any additional information that the ICC might reasonably want to know
that is related to the activities under the ICC's regulatory authority; and

      (7) as part of the Directors' orientation and continuing professional
development, as set forth in Section F, the current Directors will receive
additional training on regulatory compliance and accounting issues. This
additional training will be added to the orientation program provided to new
Directors.

      These provisions shall remain in effect for a minimum of three years from
the Settlement Effective Date, after which time the Board of Directors shall
have the discretion to alter them as it would any other corporate governance
provisions in light of experience and circumstances.

      Second, the Settling Defendants have acknowledged that the filing and
prosecution of the Action was a meaningful factor in each of the following:

      (1) the implementation of changes in corporate governance policies and
internal controls that Nicor has instituted since the derivative actions were
filed in August 2002;

      (2) personnel changes Nicor has made, including terminations,
resignations, and the creation of new positions, since the

<PAGE>

derivative actions were filed in August 2002;

      (3) the $29 million paid into escrow on May 11, 2004 by Nicor's primary
D&O insurer relating to its coverage obligation for (among other things) the
settlement in Singer v. Nicor Inc., No. 02 C 5168 and this Action; and

      (4) the agreement by Nicor's excess insurer to pay $4 million to settle
certain claims asserted against the insurer arising out of both the Singer
settlement and the settlement of the Action.

      After the Settlement Effective Date, the escrow referred to above will be
dissolved and the amounts in that account will be paid to Nicor. After the
payment of attorneys' fees described below, the Company should receive
approximately $29.5 million.

VII.  ATTORNEYS' FEES AND EXPENSES

      The Settling Defendants have agreed to pay Plaintiffs' Counsel $3,500,000
in attorneys' fees and expenses, to be paid out of insurance proceeds. To date,
Plaintiffs' Counsel have not been paid any fee by any party, nor have they been
reimbursed for their out of pocket expenses.

VIII. NOTICE OF HEARING ON PROPOSED SETTLEMENT

      A Fairness Hearing will be held on March 29, 2005 at 2:00 p.m., before the
Honorable Sophia H. Hall at the Circuit Court of Cook County, Courtroom 2301,
Richard J. Daley Center, 50 West Washington Street, Chicago, Illinois 60602 (the
"Fairness Hearing") to determine whether the Settlement should be approved as
fair, reasonable, and adequate.

      The Court may adjourn the Fairness Hearing by oral announcement at such
hearing or at any adjournment without further notice of any kind. The Court may
approve the Settlement with or without modifications, enter a Final Judgment and
Order of Dismissal, and order the payment of fees and expenses to Plaintiffs'
Counsel without further notice of any kind.

IX.   THE RIGHT TO BE HEARD AT THE  FAIRNESS HEARING

      Any current Nicor shareholder may, but is not required to, enter an
appearance in the Action and be represented by counsel of their choice and
expense. Any current Nicor shareholder who objects to any aspect of the
Settlement may appear and be heard at the Fairness Hearing. But in order to do
so you must submit a written notice of objection, sent via first-class mail,
postmarked on or before March 15, 2005, to the Clerk of the Court listed below
and to one of the following Co-Lead Counsel for Plaintiffs:

CLERK OF COURT                    John E. Emerson
Richard J. Daley Center           Scott E. Poynter
Room 1001                         Emerson Poynter  LLP
50 West Washington                2228 Cottondale Ln
Chicago, IL 60602                 Suite 100
                                  Little Rock, AR 72202
                                  800-663-9817
                                  Co-Lead Counsel for Plaintiffs

                                  Robert D. Allison
                                  Steven P. Schneck
                                  Robert D. Allison & Associates
                                  122 S. Michigan Ave.
                                  Chicago, IL. 60603
                                  312-427-7600
                                  Co-Lead Counsel for Plaintiffs

                                  Marc M. Umeda
                                  Robbins, Umeda & Fink, LLP
                                  610 West Ash Street
                                  Suite 1800

<PAGE>

                                  San Diego, CA 92101
                                  619-525-3990
                                  Co-Lead Counsel for Plaintiffs


      In order to object to the Settlement of the Action, the notice must
demonstrate the objector's standing as a current Nicor shareholder, i.e., proof
of ownership of Nicor common stock as of the date of the notice of objection.
The notice of objection must also contain a sworn statement detailing the number
of shares of Nicor stock that the current Nicor shareholder owns and that the
shares were owned prior to the date of this Notice, and must set forth in
writing: (i) the nature of and reasons for the objection; (ii) the name(s) of
any witness(es) that the objecting current Nicor shareholder plans to present at
the Fairness Hearing; and (iii) the nature of any testimony that the witness(es)
will provide at the Fairness Hearing. Only current Nicor shareholders who have
submitted written notices of objection in this manner will be entitled to be
heard at the Fairness Hearing, although attendance at the Fairness Hearing is
not necessary in order for an objection to be considered by the Court. Unless
otherwise ordered by the Court, any current Nicor shareholders who do not make
their objections to the Settlement in the manner provided above shall be deemed
to have waived all objections and opposition to the fairness, reasonableness,
and adequacy of the Settlement.

X.    DISMISSAL AND RELEASE

      If the Settlement is approved, the Court will enter a Final Judgment and
Order of Dismissal which will dismiss the Action with prejudice pursuant to the
terms of the Stipulation. The Final Judgment and Order of Dismissal will dismiss
the Settled Claims with prejudice as to all Released Parties.

XI.   NOTICE TO PERSONS OR ENTITIES HOLDING RECORD OWNERSHIP ON
      BEHALF OF OTHERS

      Brokerage firms, banks and other persons or entities who are current Nicor
shareholders in their capacities as record owners, but not as beneficial owners,
are requested to promptly notify beneficial owners of this Notice.

XII.  EXAMINATION OF PAPERS

      This Notice is a summary and does not describe all of the details of the
stipulation. For full details of the matters discussed in this Notice, you may
desire to review the Stipulation filed with the Court, which may be inspected
during business hours at the office of the Clerk of Court, Richard J. Daley
Center, Room 802, 50 West Washington St., Chicago, Illinois, 60602.

DO NOT TELEPHONE THE COURT REGARDING THIS NOTICE.

IF YOU HAVE QUESTIONS, PLEASE CALL PLAINTIFFS' CO-LEAD COUNSEL AT THE PHONE
NUMBERS LISTED ABOVE.

DATED:  FEBRUARY 18, 2005 BY ORDER OF THE CIRCUIT COURT OF COOK
COUNTY, ILLINOIS


<PAGE>

                                                                      Exhibit B


         IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
             COUNTY DEPARTMENT -- CHANCERY DIVISION

IN RE NICOR INC. SHAREHOLDER     )        No. 02 CH 15499
DERIVATIVE LITIGATION            )
                                 )        Judge Sophia H. Hall


                           PRELIMINARY APPROVAL ORDER

      WHEREAS, the Settling Parties have entered into a Stipulation and
Agreement of Settlement, dated as of February 16, 2005 (the "Stipulation")1
relating to the above referenced litigation (the "Action"), which is subject to
review under 805 ILCS 5/7.80(c) and which, together with the exhibits thereto,
sets forth the terms and conditions for the proposed settlement of the Action
and the dismissal of the Action with prejudice; and the Court having read and
considered the Stipulation and the accompanying documents; and the parties to
the Stipulation having consented to entry of this Order;
      NOW, THEREFORE, IT IS HEREBY ORDERED, this _____ day of February, 2005,
that:
1.    The terms of the Stipulation, and the Settlement provided therein, are
preliminarily approved. A hearing (the "Fairness Hearing"), pursuant to 805 ILCS
5/7.80(c), shall be held before the Court on March 29, 2005, at 2:00 p.m. in the
Circuit Court of Cook County, Illinois, Richard J. Daley Center, 50 West
Washington Street, Chicago, Illinois 60602 (or such adjourned time or times as
the Court may without further notice direct:
           (a) to determine whether the terms of the Stipulation and the
      proposed Settlement provided for therein are fair, reasonable, adequate,
      and should be approved by the Court;

_________________________________
1     All capitalized terms used herein have the same meaning defined in the
      Stipulation.

<PAGE>


           (b) to determine whether the Final Judgment as provided under the
      Stipulation should be entered; and
           (c) to rule upon such other matters as the Court may deem
      appropriate.
      2. The Court hereby approves, as to form and content, the Notice of
Hearing on Proposed Settlement of Shareholder Derivative Action (the "Notice"),
annexed as Exhibit B to the Stipulation. No more than seven (7) days after entry
of this Order, the Notice shall be provided as stated in paragraph 9 of the
Stipulation.
      3. The Court finds that the distribution of the Notice provided for in
paragraph 9 of the Stipulation is the best notice practicable under the
circumstances and shall constitute due and sufficient notice to all persons
entitled thereto.
      4. Any Shareholder may appear at the Fairness Hearing and show cause why
the proposed Settlement of the Action embodied in the Stipulation should not be
approved as fair, reasonable, and adequate, or why a judgment should not be
entered thereon; provided, however, that no shareholder of Nicor or any other
person shall be entitled to contest the approval of the terms and conditions of
the proposed Settlement, or, if approved, the judgment to be entered thereon
approving the same, unless his, her, or its objection or opposition, including
the basis therefor, together with a sworn statement that the person or entity
making the objection in opposition is a current Shareholder of Nicor and was a
Shareholder at the time the Notice was sent and stating the number of shares
currently held, is made in writing, filed with the Court, and mailed by
first-class mail postmarked no later than fourteen (14) days prior to the
Fairness Hearing to one of the following Plaintiffs' Co-Lead Counsel: Robert D.
Allison & Associates, 122 South Michigan Avenue, Suite 1850, Chicago IL 60603,
Scott E. Poynter, Emerson Poynter LLP, 2228 Cottondale Ln, Suite 100, Little
Rock, AR 72202, or Marc Umeda, Robbins

                                        2

<PAGE>

Umeda & Fink LLP, 610 W. Ash St., Suite 1800, San Diego, CA 92101. Plaintiffs'
Co-Lead Counsel shall promptly provide copies of any such objections to counsel
for defendants. Any shareholder of Nicor who does not make his, her, or its
objection in the manner provided herein shall be deemed to have waived such
objection and shall forever be foreclosed from appearing at the Fairness Hearing
or making any objection to the fairness or adequacy of the proposed Settlement
as incorporated in the Stipulation, unless otherwise ordered by the Court.
      5. All papers in support of the Settlement shall be filed at least seven
(7) days prior to the Fairness Hearing.
      6. The Court reserves the right to continue or adjourn the date of the
Fairness Hearing and the continuance or adjournment thereof without further
notice to the shareholders of Nicor and retains jurisdiction to consider all
further applications arising out of or connected with the proposed Settlement.
      7. Pending final determination as to whether the Settlement contained in
the Stipulation should be approved, neither the Plaintiffs, nor any shareholder
of Nicor, nor Nicor, either directly, representatively, or in any other capacity
shall commence or prosecute any action or proceeding in any court or tribunal
asserting any of the Released Claims against any of the Released Parties.

                               IT IS SO ORDERED:


                               _______________________________
                               Sophia H. Hall
                               Judge of the Circuit Court of Cook County

                               Dated: __________________, 2005



                                        3


<PAGE>

                                                                      Exhibit C


           IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
               COUNTY DEPARTMENT -- CHANCERY DIVISION


IN RE NICOR INC. SHAREHOLDER    )       No. 02 CH 15499
DERIVATIVE LITIGATION           )       Judge Sophia H. Hall
                                )


               FINAL JUDGMENT AND ORDER OF DISMISSAL

      On the 29th day of March, 2005, a hearing was held by this Court to
determine: (1) whether the terms and conditions of the Stipulation and Agreement
of Settlement, dated as of February 16, 2005 (the "Stipulation"), which is
subject to review under 805 ILCS 5/7.80(c), are fair, reasonable, and adequate;
(2) whether judgment should be entered dismissing the Complaint filed in this
Action with prejudice; and (3) whether a release of the Released Claims, as set
forth in the Stipulation, should be provided to the Released Parties. The Court
having considered all matters submitted to it at the hearing and otherwise;
notice of the proposed settlement and the hearing having been given to the
shareholders of Nicor in the form approved by the Court; and the Court having
considered and determined that the proposed Settlement as set forth in the
Stipulation is fair, reasonable, and adequate;

      NOW, THEREFORE, IT IS HEREBY ORDERED, this _____ day of ___________, 2005
that:

      1. The Stipulation, including the definitions contained therein, is
incorporated by reference in this Final Judgment and Order of Dismissal.

      2. This Court has jurisdiction over the subject matter of this Action.

      3. The notice given to the shareholders of Nicor as set forth in the
Stipulation was the best notice practicable under the circumstances, and such
notice provided due and adequate

<PAGE>

notice of those proceedings and of the matters set forth therein, including the
proposed Settlement set forth in the Stipulation, in accordance with Illinois
law and the requirements of due process.

      4. This Court hereby approves the Settlement set forth in the Stipulation
and finds that the Settlement is, in all respects, fair, reasonable, and
adequate with respect to Nicor and its shareholders.

      5. The Court hereby awards Plaintiffs' Counsel attorneys' fees and
expenses in the amount of $3,500,000. Payment of these fees and expenses shall
be made as provided in the Stipulation. If there are any disputes over the
distribution or allocation of attorneys' fees and/or expenses between or among
Plaintiffs' Counsel, those disputes shall be mediated, but if not resolved,
decided by the Court.

      6. The Court hereby dismisses the Action with prejudice and without costs,
except as provided in the Stipulation.

      7. Upon the Settlement Effective Date, Plaintiffs, each shareholder of
Nicor, and Nicor shall be deemed to have, and by operation of the Final Judgment
and Order of Dismissal shall have, fully, finally, and forever released,
relinquished, and discharged each and every one of the Released Parties from the
Released Claims as defined by the Stipulation and from all claims arising out of
the settlement or resolution of the Action.

      8. Plaintiffs, Nicor, and all shareholders of Nicor, and all persons
acting in concert or participation with them, either directly, indirectly,
representatively, or in any other capacity, are hereby forever restrained and
enjoined from prosecuting, pursuing, or litigating any of the Released Claims
against any of the Released Parties in this or any other forum.

                                        2

<PAGE>

      9. Upon the Settlement Effective Date, each of the Settling Parties shall
be deemed to have, and by operation of the Final Judgment and Order of Dismissal
shall have, fully, finally, and forever released, relinquished, and discharged
each other, each Shareholder, Plaintiffs, and Plaintiffs' Counsel from all
claims relating to, arising out of, or connected with the institution,
prosecution, assertion, settlement or resolution of the Action and/or the
Released Claims.

      10. Without affecting the finality of this Final Judgment and Order of
Dismissal in any way, this Court hereby retains continuing jurisdiction over:
(a) the implementation of the Settlement; and (b) the Settling Parties for the
purpose of construing, enforcing, and administering the Stipulation and the
Settlement.

                               IT IS SO ORDERED:



                               _____________________________
                               Sophia H. Hall
                               Judge of the Circuit Court of Cook County

                               Dated: ______________, 2005


                                        3