Nicor Inc.
                                                        Form 10-Q
                                                        Exhibit 10.01



                                      2002
                NICOR GAS INCENTIVE COMPENSATION PLAN


A.  The 2002 Nicor Gas Incentive Compensation Plan is designed to link
    participant incentive compensation to the accomplishment of important
    objectives-both financial goals and defined strategic plans. It ties the pay
    an individual receives to his performance and that of the company. This plan
    is intended to provide a flexible framework for a performance bonus program
    for Nicor Gas.

B.  Purpose

    The purpose of this Plan is to provide an annual incentive plan which
    supports the longer-term strategic planning process. This is done by linking
    pay to the performance of tasks which focus on objectives of strategic
    importance. The Plan also encourages teamwork among officer areas and among
    line and staff groups.

C.  Eligible Group

    Officers of Nicor Gas in Salary Bands EX-1 or higher are eligible for
    participation. Participation should be limited to those employees in
    positions which enable them to make significant contributions to the
    performance and growth of the company.

D.  Components of Plan

    Compensation Objective
    Bonus Targets
    Performance Targets
    Goal Setting Guidelines
    Program Schedule
    Form of Payment

    Compensation Objective

    Base Salary + Bonus Target = Short-Term Compensation Objective


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    An individual's short-term compensation objective will be based on salary
    plus a bonus, expected to be earned if agreed-upon performance targets are
    met. Under certain conditions, short-term compensation above or below
    targets may be paid.

    Standards for base salaries will be managed at the appropriate blend of
    general and industry quartile which will be determined by survey data. Bonus
    targets will be set based on the individual's job responsibilities and
    compensation objective, such that total compensation objectives are managed
    at the level as determined by the Compensation Committee to remain
    competitive.

    Bonus Target

    The bonus target amount varies according to pay, job responsibilities and
    ability to impact the organization. Higher responsibility and impact levels
    result in greater dollars at risk.

    Performance Targets

    Performance criteria focus on the achievement of agreed-upon and documented
    strategic goals. Performance targets may include measures of financial
    performance, defined group objectives or individual performance objectives.
    Each particular performance target will be assigned weighting reflected as a
    percentage of bonus target.

    Goal Setting Guidelines

    The most important aspect of this Plan will be in establishing effective
    goals. In addition to the goals which will be measured by company financial
    performance, realistic, operational management goals may be established. As
    well as being realistic, the goals should be measurable wherever possible by
    quantifiable performance criteria. It is recognized that measurement of some
    goals will require subjective assessments of performance. Goals must be
    consistent with the longer-term strategic plan.

    Amount of bonus payment for financial/budget related goals can vary above
    and below target based upon results achieved. For targets met, bonus amount
    will be 100% of bonus target. When targets are exceeded or are not reached,
    bonus will be proportionately more or less than the target.



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    Project goals which are not quantifiable will be evaluated by the Nicor Gas
    CEO based on performance and will fall into one of six categories of
    achievement: unsatisfactory; less than expected, but more than
    unsatisfactory; less than expected, but satisfactory given facts and
    circumstances; expected; more than expected, but less than outstanding; and
    outstanding performance. Accordingly, performance at, below or above
    expected performance will result in awards relative to performance.

    The Compensation Committee may make appropriate upward or downward
    adjustments if, after taking into consideration all of the facts and
    circumstances of the performance period, it determines that adjustments are
    warranted.

    Plan Schedule

    The 2002 Nicor Gas Incentive Compensation Plan runs on a calendar year
    basis, with the strategic planning cycle and budgeting process the primary
    link to performance and bonus targets. Responsibility for determination of
    financial results will be with the Accounting Department. A program for
    review will be established and project or company goal performance will be
    reviewed at least twice each performance year.

    Year-end results should be available and evaluated in January of the
    following year. Following approval of the Compensation Committee and Board
    at the January meeting, bonuses will be payable to participants.

    Form of Payment

    All awards will be paid in cash, except that a participant in the Stock
    Deferral Plan may elect to defer up to 50% of their award into that plan.
    Deferral elections must meet the guidelines and timing of the Stock Deferral
    Plan to be effective. Appropriate taxes for the entire award amount will be
    withheld from the portion of the award being paid in cash.

E.  Integration with Existing Programs

    Base salaries will be managed with range bands at the appropriate blend of
    general and industry quartile for comparable positions, with total
    compensation objectives to be managed at a level appropriate with the
    performance of the company, as determined by the Compensation Committee.
    Salaries will be monitored each year and increases granted based on merit
    and range bands. Bonus targets will be set as a percentage of base salary. A
    change, other than the annual salary review, in the compensation objective
    will


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    customarily occur during the year only through promotion to various levels,
    at which time the base salary and bonus target are also likely to change.

    Promotion of an employee during the year or reassignment to responsibilities
    in which new performance objectives apply will result in proration of the
    existing performance objectives and bonus target and assignment of new
    performance objectives and if appropriate, a new bonus target as the
    Compensation Committee shall determine.

    Promotion into an Executive Salary Band would create eligibility for bonus
    at an amount prorated, based on the effective date of the promotion.

    If a participant voluntarily terminates or is terminated for cause prior to
    the end of the performance period, then the participant will be entitled to
    no award. In the event a participant shall die, become disabled, or retire
    before the end of the performance period, an award is payable prorated or
    the Compensation Committee may authorize payment of an award to the
    participant, or beneficiary, in such other amount as the Committee deems
    appropriate.

F.  Responsibility

    Acceptance and success of this Plan will depend on documented, realistic
    goals that are fair, understandable and measurable. Considerable management
    focus and involvement will be required for goals to be established,
    communicated and monitored.

    The Human Resources Department will be responsible for the administration of
    the system for the company. This will include:

    1) monitoring market salary and total compensation levels,

    2) recommending structural changes in base salary and
       compensation objective adjustments, and,

    3) assisting the Nicor Gas CEO in progress and exception reporting to the
       Compensation Committee.


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    The Nicor Gas CEO shall be responsible for:

    1) reviewing market salary and compensation levels and
       approving recommendations before presentation to the
       Compensation Committee,

    2) approving structural changes in base salary and
       compensation objective adjustments before presentation to
       the Compensation Committee,

    3) recommending eligibility, performance targets and goals to
       the Compensation Committee,


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    4) monitoring performance targets through the Accounting
       Department and other sources of necessary documentation,

    5) communicating progress reports to the participants, and,

    6) reporting performance results and making award
       recommendations to the Compensation Committee.

    The company's 2002 Nicor Gas Incentive Compensation Plan and changes to its
    performance targets and measurement criteria will be reviewed and approved
    by the Compensation Committee.

    In establishing the actual bonus awards to be made, the Compensation
    Committee may take into account all of the facts and circumstances which
    exist during the year and may make appropriate upward or downward revisions
    in performance criteria, add or delete objectives, or change the relative
    percentages assigned to the various performance objectives.

G.  Amendment and Termination

    The Board of Directors may amend or terminate the Plan at any time without
    the consent of the participants. No such amendment or termination shall
    negatively impact any participant's amount which accrued under the Plan
    prior to the calendar year in which the amendment is made.