1997 LONG-TERM INCENTIVE PROGRAM


At the April 1997 meeting of the Compensation Committee, the
Committee approved the 1997 Long-Term Incentive Program,
participants and awards.  Shown below is a full description of
the Long-Term Program for 1997.

Summary of 1997 Long-Term Incentive Program

- Combination of Stock Options (SOs) and Dividend Performance
  Units (DPUs).

  -  Annual grants of both, generally on a one-for-one basis.

  -  Nothing prevents the Committee from granting either
     freestanding stock options or dividend performance units.

- SOs have a ten-year term and would vest after three years.

- DPUs would accumulate dividend equivalents over at least a
  three-year period, and would pay out based on total
  shareholder return over the period.

- SOs and DPUs would be freestanding.

- The company will also continue to make selected use of
  restricted stock.

Description of Stock Options

- Option exercise price set at fair market value on date of
  grant.

- Options vest after three years (100% in year three).

- Options expire ten years from date of grant.

- Options can be NQSOs or ISOs; NICOR plans to grant NQSOs in
  1997.

Description of Dividend Performance Units

- Each dividend performance unit accumulates all of the
  dividends paid on one share of NICOR stock during the
  three-year period.  As an example, if NICOR's annual dividend
  grows at $0.08 per year from its current level of $1.40, each
  unit would be worth $4.38 at the end of three years:






                               -2-


                      Annual Dividend            Cumulative
      Year                As of May         Dividend Unit Value
      1996               $1.32                    -
      1997               $1.40                   $1.38
      1998               $1.48                   $2.84 
      1999               $1.56                   $4.38

- Accrued dividend equivalents are not reinvested in company
  stock, nor is any interest paid on accrued dividends.

- Dividend performance units accumulate no additional value
  after the end of the three-year period.

- Dividend performance units will pay out in cash, except that a
  participant in the Stock Deferral Plan may elect to defer up
  to 50% of their payout into that plan.  Deferral elections
  must meet the guidelines and timing of the Stock Deferral Plan
  to be effective.

How Dividend Performance Unit Payouts are Determined

- All dividend performance units pay out at the end of at least
  three years.

- The payout is modified by a performance multiplier which
  ranges from 0 to 1.5.

- The multiplier is based on NICOR total shareholder return
  (TSR) over the performance period, as compared to the
  performance of a utility industry peer group (S&P utility
  group).  

- The following schedule shows the proposed dividend performance
  unit multiplier schedule:
                    Dividend Performance Unit
                       Multiplier Schedule     

            NICOR TSR Performance     
            Percentile Relative        Dividend Performance Unit
            To S&P Utility Group               Payout Multiple   
   
         75th Percentile or Higher           1.5   X
              60th Percentile                1.0   X
              50th Percentile                0.75  X
              40th Percentile                0.5   X
              25th Percentile                0.25  X
         Below 25th Percentile               0     X




                                -3-



- If NICOR total shareholder return for the performance period
  is negative, the dividend performance unit payout multiple
  will be zero.

Termination Provisions

In the case of death, disability or retirement:

- Non-vested options and dividend performance units held for
  more than one year (as of the date of death, disability or
  retirement) will vest and/or pay out in full.

- The full number of dividend performance units will pay out at
  the end of the performance cycle, based on the normal per-unit
  performance/pay out guidelines.

- Vested options will remain exercisable for three years after
  the date of death, disability or retirement.

- The Compensation Committee can override these provisions at
  its discretion.

In the case of termination of employment for any other reason,
there will be no accelerated vesting of unvested options and
dividend performance units.  Vested options will remain
exercisable for three months after the date of termination.  The
Compensation Committee can override these provisions at its
discretion.

                                             
NICOR Human Resources
           April 1997