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| TABLE                  OF CONTENTS                            |
|---------------------------------------------------------------|
|                                                          |   |   |   |
|  SECTION                1 GENERAL                        |   | 1 |
|                                                          |   |   |   |
|                        1.1 |                          Purpose  |   | 1 |
|                        1.2 |                          Plan Administration  |   | 1 |
|         1.3           |                          Applicable Law  |   | 1 |
|                                           |   |   |   |
|  SECTION                2 AWARDS                         |   | 1 |
|                                                          |   |   |   |
|                        2.1 |                          General  |   | 1 |
|                        2.2 |           Definition |   | 2 |
|                            |   |   |   |
|  SECTION                3 OPERATION AND ADMINISTRATION   | 3 |
|                                                          |   |   |   |
|         3.1      |                          Effective Date  |   | 3 |
|                        3.2 |                          Shares Subject to Plan  |   | 3 |
|                        3.3 |                            Adjustments to Shares |   | 3 |
|                        3.4 |                          Limit on Distribution |   | 3 |
|                                                          |   |   |   |
| SECTION                4 AMENDMENT AND TERMINATION            | 3 |
|                                                          |   |   |   |

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| (a)   | As                of the Award Date for each Plan Year, each Director who is an Eligible                Director both on the first day of that Plan Year and on such Award                Date                shall be granted an “Award” for the year equal to the Fair Market Value of                1,200 shares of common stock of the Company (“Stock”) on such date. The                Award will be payable in cash, a “Cash Distribution” or at the election of                the Director, one-half of the Award may be paid in the form of Stock,                or a                “Stock Award.” |
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| (b)   | A                Director who becomes an Eligible Director during a Plan Year on a                date                other than the first day of the Plan Year, shall receive a prorated                Award                to reflect the portion of the Plan Year in which he is an Eligible                Director. If the Director becomes an Eligible Director after the                Award                Date for such Plan Year, then such Award shall be made on the date                that                the Director becomes an Eligible Director and the Fair Market Value                of the                shares of Stock subject to such Award shall be determined on such                date. If                the Director becomes an Eligible Director before the Award Date for                such                Plan Year, then the Award will be made on the Award Date and the                Fair                Market Value of the shares of Stock subject to such Award shall be                determined on the Award Date. All such Awards will be payable only                in the                form of a Cash Distribution. |
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| (c)   | A                Director who ceases to be an Eligible Director during a Plan Year                for any                reason other than death or Disability prior to the Award Date for                the year                shall not be entitled to receive an Award for the year. An Eligible                Director who ceases to be a Director prior to the Award Date for                the year                by reason of death or Disability will remain eligible to receive                an Award                for such year.  |
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| (d)   | An                Eligible Director may elect to defer receipt of an Award payable                after                January 1, 2008 under the terms of the NICOR Inc. Directors’ Deferred                Compensation Plan; in which case such Award shall be payable at such                time                and in such form as is permissible under the NICOR Inc. Directors’                Deferred Compensation Plan. |
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| (a)   | The                term “Award” shall mean the Fair Market Value of 1,200 shares of Stock, or                such prorated amount as determined under Section 2.1(b) granted to                an                Eligible Director. |
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| (b)   | The                “Award Date” shall be the first business day of the fifth full calendar                month following the first day of the Plan Year. |
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| (c)   | The                “Board” shall be the Board of Directors of the Company. A “Director” is a                member of the Board, and each Director who is not an employee of                the                Company or any Related Company shall be an “Eligible                Director”. |
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| (d)   | A                Director shall be considered to have a “Disability” during the period in                which he is unable, by reason of a medically determinable physical                or                mental impairment, engage in any substantial gainful activity, which                condition, in the opinion of a physician selected by the Committee,                is                expected to have a duration of not less than 120 days. |
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| (e)   | The                “Fair Market Value” of a share of Stock as of any date shall be the                closing market composite price for such Stock as reported for the                New York                Stock Exchange Composite Transactions on that date or, if Stock is                not                traded on that date, on the next preceding date on which Stock was                traded. |
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| (f)   | The                “Plan Year” is the period (i) beginning on the date on which members of                the Board begin their yearly term as Board members following the                election                of Directors at the Company’s annual stockholders meeting and (ii) ending                on the day immediately prior to the first day of the following Plan                Year.                The first Plan Year shall begin on the Effective Date. |
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| (g)   | A                “Related Company” is any corporation during any period in which it is a                Subsidiary, or during any period in which it directly or indirectly                owns                50% or more of the total combined voting power of all classes of                stock of                the Company that are entitled to vote. A “Subsidiary” is any corporation                during any period in which 50% or more of the total combined voting                power                of all classes of stock entitled to vote is owned, directly or indirectly,                by the Company. |
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| (a)   | Notwithstanding                any other provision of the Plan, the Company shall have no liability                to                deliver any shares of Stock under the Plan or make any other distribution                of benefits under the Plan unless such delivery or distribution would                comply with all applicable laws and the applicable requirements of                any                securities exchange or similar                entity. |
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| (b)   | To                the extent that the Plan provides for issuance of certificates to                reflect                the transfer of shares of Stock, the transfer of such shares may,                at the                direction of the Committee, be effected on a non-certificated basis,                to                the extent not prohibited by the provisions of Securities and Exchange                Commission Rule 16b-3, applicable local law, the applicable rules                of any                stock exchange, or any other applicable rules. |
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