Nicor
        Inc.
 Form
        10-K
 Exhibit
        10.47
 
 **CHANGE-IN-CONTROL
        AGREEMENT**
 
 THIS
        AGREEMENT dated as of July 20, 2004 (the “Agreement Date”) is made by and among
        Nicor Inc. (the “Company”), an Illinois corporation, and Gerald P. O’Connor (the
“Executive”).
 
 ARTICLE I
 PURPOSES
 
 The
        Board
        of Directors of the Company (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, 2005. As of December 31, 2005, 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  “Effective
        Date” means the first date during the Agreement Term on which a Change in
        Control occurs.
 
 2.3  “Change
        in Control” means:
 
 2.3.1  The
        acquisition by any individual, entity or group (within the meaning of
        Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
        amended (the “Exchange Act”) (a “Person”) of beneficial ownership (within the
        meaning of Rule 13d-3 promulgated under the Exchange Act) of any shares of
        Common Stock of the Company or any voting securities of the Company entitled
        to
        vote generally in the election of directors if, as a result of such acquisition,
        such person owns 20% or more of either (i) the outstanding shares of common
        stock of the Company (the “Outstanding Company Common Stock”), or (ii) the
        combined voting power of the outstanding voting securities of the Company
        entitled to vote generally in the election of directors (the “Outstanding
        Company Voting Securities”); provided, however, that for purposes of this
        subsection 2.3.1, the following acquisitions shall not constitute a Change
        in
        Control: (A) any acquisition by the Company, (B) any acquisition by an
        employee benefit plan (or related trust) sponsored or maintained by the Company
        or any corporation controlled by the Company (a “Company Plan”), or (C) any
        acquisition by any corporation pursuant to a transaction which complies with
        subsections 2.3.3.1, 2.3.3.2 and 2.3.3.3 of this definition; provided further,
        that for purposes of clause (A), if any Person (other than the Company or
        any Company Plan) shall become the beneficial owner of 20% or more of the
        Outstanding Company Common Stock or 20% or more of the Outstanding Company
        Voting Securities by reason of an acquisition by the Company, and such Person
        shall, after such acquisition by the Company, become the beneficial owner
        of any
        additional shares of the Outstanding Company Common Stock or any additional
        Outstanding Company Voting Securities (other than pursuant to any dividend
        reinvestment plan or arrangement maintained by the Company) and such beneficial
        ownership is publicly announced, such additional beneficial ownership shall
        constitute a Change in Control; or
 
 2.3.2  Individuals
        who, as of the date hereof, constitute the Board of Directors of the Company
        (for purposes of this Section 2.3, the “Incumbent Board”) cease for any
        reason to constitute at least a majority of the Incumbent Board; provided,
        however, that any individual becoming a director subsequent to the date hereof
        whose election, or nomination for election by the Company shareholders, was
        approved by a vote of at least a majority of the directors then comprising
        the
        Incumbent Board shall be considered as though such individual were a member
        of
        the Incumbent Board, but excluding, for this purpose, any such individual
        whose
        initial assumption of office occurs as a result of an actual or publicly
        threatened election contest (as such terms are used in Rule 14a-11
        promulgated under the Exchange Act) or other actual or publicly threatened
        solicitation of proxies or consents by or on behalf of a Person other than
        the
        Board of Directors of the Company; or
 
 2.3.3  Consummation,
        including receipt of any necessary regulatory approval, of (i) a reorganization,
        merger, consolidation or other business combination involving the Company
        or
        (ii) the sale or other disposition of more than 50% of the operating assets
        of the Company (determined on a consolidated basis), other than in connection
        with a sale-leaseback or other arrangement resulting in the continued
        utilization of such assets (or the operating products of such assets) by
        the
        Company (any transaction described in part (i) or (ii) being referred to
        as a
“Corporate Transaction”); excluding, however, a Corporate Transaction pursuant
        to which:
 
 2.3.3.1  all
        or
        substantially all of the individuals and entities who are the beneficial
        owners,
        respectively, of the Outstanding Company Common Stock and Outstanding Company
        Voting Securities immediately prior to such Corporate Transaction beneficially
        own, directly or indirectly, more than 60% of, respectively, the then
        outstanding shares of common stock and the combined voting power of the then
        outstanding voting securities entitled to vote generally in the election
        of
        directors, as the case may be, of the ultimate parent entity resulting from
        such
        Corporate Transaction (including, without limitation, an entity which, as
        a
        result of such transaction, owns the Company or all or substantially all
        of the
        assets of the Company either directly or through one or more subsidiaries)
        in
        substantially the same proportions as their ownership, immediately prior
        to such
        Corporate Transaction of the Outstanding Company Common Stock and Outstanding
        Company Voting Securities, as the case may be;
 
 2.3.3.2  no
        Person
        (other than the Company, any Company Plan or related trust, the corporation
        resulting from such Corporate Transaction, and any Person which beneficially
        owned, immediately prior to such Corporate Transaction, directly or indirectly,
        20% or more of the Outstanding Company Common Stock or the Outstanding
        Company Voting Securities, as the case may be) will beneficially own, directly
        or indirectly, 20% or more of, respectively, the then outstanding common
        stock of the ultimate parent entity resulting from such Corporate Transaction
        or
        the combined voting power of the then outstanding voting securities of such
        entity; and
 
 2.3.3.3  individuals
        who were members of the Incumbent Board will constitute at least a majority
        of
        the members of the board of directors of the ultimate parent entity resulting
        from such Corporate Transaction; or
 
 2.3.4  A
        tender
        offer (for which a filing has been made with the Securities and Exchange
        Commission (the “SEC”) which purports to comply with the requirements of
        Section 14(d) of the Exchange Act and the corresponding SEC rules) is made
        for the stock of the Company, which has not been negotiated and approved
        by the
        Board, provided that in case of a tender offer described in this subsection
        2.3.4, the Change in Control will be deemed to have occurred at the first
        time
        during the offer period when the Person (as defined in subsection 2.3.1,
        above)
        making the offer beneficially owns or has accepted for payment stock of the
        Company with 20% or more of the combined voting power of the then Outstanding
        Company Voting Securities; or
 
 2.3.5  Approval
        by the shareholders of the Company of a plan of complete liquidation or
        dissolution of the Company.
 
 2.3.6  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 under paragraphs 2.3.1, 2.3.3 or 2.3.4 above.
 
 2.3.7  By
        entering into this Agreement, the Executive irrevocably consents to the
        modification of the definition of “Change in Control” (including “change in
        control”) in all Employee Benefit Arrangements (as defined below), by
        substituting for such definition in each such Employee Benefit Arrangement
        the
        definition of “Change in Control” set forth above, with such substitution to be
        effective on the first date this Agreement has been signed by both the Company
        and the Executive. For purposes of the preceding sentence, the term “Employee
        Benefit Arrangement” shall mean each agreement with the Executive to which the
        Company or any Subsidiary is a party, and each plan or arrangement maintained
        by
        the Company or any Subsidiary, and including any awards outstanding under
        any
        such agreement, plan, or arrangement, to the extent that such award, agreement,
        plan, or arrangement contains a definition of “Change in Control.” However, to
        the extent that the Employee Benefit Arrangement provides for an award based
        on
        common stock of the Company (including, without limitation, an award of stock
        options or shares of restricted stock), and such Employee Benefit Arrangement
        provides that vesting or exercisability of such award will occur at the time
        of
        the Change in Control (rather than the occurrence of a subsequent event,
        such as
        termination of employment), the definition of “Change in Control” that is
        substituted for the definition in such Employee Benefit Arrangement shall
        be the
        definition of “Change in Control” set forth above, except that
        Section 2.3.4 shall be modified by adding, at the end of such Section,
        immediately prior to the word “or,” the following: “provided, however, that the
        Change in Control shall occur three (3) business days before such tender
        offer
        is to terminate, unless the offer is withdrawn first, if the Person making
        the
        offer could own, by the terms of the offer plus any shares beneficially owned
        by
        that Person, stock with 50% or more of the combined voting power of the then
        Outstanding Company Voting Securities when the offer (and any subsequent
        offering period) terminates;”
 
 2.3.8  By
        entering into this Agreement, the Executive irrevocably consents to the
        amendment of the Nicor Inc. Stock Deferral Plan to provide for distribution,
        as
        soon as practicable following a Change in Control, of any amounts which may
        then
        be deferred for the Executive under such plan.
 
 2.4  “Code”
        means the Internal Revenue Code of 1986, as amended.
 
 2.5  “Employment
        Period” means the period commencing on the Effective Date and ending on the
        two-year anniversary of that date.
 
 2.6  “Incentive
        Plan” shall have the meaning set forth in Section 3.2.2.
 
 2.7  “Notice
        of Termination” means a written notice given in accordance with
        Section 11.8 which sets forth (a) the specific termination provision
        in this Agreement relied upon by the party giving such notice, (b) in
        reasonable detail the facts and circumstances claimed to provide a basis
        for
        termination of the Executive’s employment under such termination provision, and
        (c) if the Termination Date is other than the date of receipt of such
        Notice of Termination, the Termination Date.
 
 2.8  “Plans”
        shall have the meaning set forth in Section 3.2.3.
 
 2.9  A
        “Potential Change in Control” shall exist during any period in which the
        circumstances described in Sections 2.9.1, 2.9.2, or 2.9.3 exist (provided,
        however, that a Potential Change in Control shall cease to exist not later
        than
        the occurrence of a Change in Control):
 
 2.9.1  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 2.9.1 shall cease to exist upon the expiration or
        other termination of all such agreements.
 
 2.9.2  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 2.9.2 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.
 
 2.9.3  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 2.9.3 shall cease to exist upon a reasonable
        determination by the Board 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.
 
 2.10  “Severance
        Incentive” means the greater of (i) the target annual incentive under an
        Incentive Plan applicable to the Executive for the Performance Period 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.
 
 2.11  “Severance
        Period” means the period beginning on the Executive’s Termination Date and
        ending on the second 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).
 
 2.12  “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).
 
 2.13  “Termination
        Date” means the first day on or after which the Executive is not employed by the
        Company or Nicor Gas; provided, however, that (a) if the Company and Nicor
        Gas terminate the Executive’s employment other than for Cause or Disability (as
        defined in Section 4.1.2), then the Termination Date shall be the date of
        receipt of the Notice of Termination and (b) if the Executive’s employment
        is terminated by reason of death or Disability, then the Termination Date
        shall
        be the date of death of the Executive or the Disability Effective Date (as
        defined in Section 4.1.1), as the case may be.
 
 2.14  “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
        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
        (“Plans”) applicable generally to other senior executives of the Company, but in
        no event shall such Plans provide the Executive with incentive 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 .
        During
        the Employment Period, the Executive shall be entitled to receive prompt
        reimbursement for all reasonable expenses incurred by the Executive 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.
 
 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.
 
 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;
 
 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
        any material breach of this Agreement by the Company or Nicor Gas,
        including:
 
 4.4.1  the
        failure to maintain the Executive in the office or position, or in a
        substantially equivalent office or position, held by the Executive immediately
        prior to the Change in Control;
 
 4.4.2  a
        material adverse alteration in the nature or scope of the Executive’s position,
        duties, functions, responsibilities or authority;
 
 4.4.3  a
        material reduction of the Executive’s salary, incentive compensation or
        benefits;
 
 4.4.4  the
        failure of any successor to the Company to assume this Agreement, or a material
        breach of the Agreement by the Company or its successor;
 
 4.4.5  a
        relocation of more than 25 miles of (i) the Executive’s principal
        workplace, or (ii) the principal offices of the Company or Nicor Gas, as
        applicable, (if such offices are the Executive’s principal workplace), in each
        case without the consent of the Executive;
 
 4.4.6  the
        Company or Nicor Gas, as applicable, requiring the Executive to engage in
        travel
        that is materially greater than the Executive’s travel obligations during the
        one-year period immediately prior to the Change in Control; or
 
 4.4.7  any
        failure by the Company or Nicor Gas, as applicable, to comply with any of
        the
        provisions of Section 3.2 of this Agreement, other than an isolated,
        insubstantial and inadvertent failure not occurring in bad faith and which
        is
        remedied by the Company or Nicor Gas, as applicable, promptly after receipt
        of
        notice thereof given by the Executive;
 
 provided,
        however, that an act or omission of the Company or Nicor Gas, as applicable,
        shall not constitute Good Reason: (i) unless the Executive gives the
        Company or Nicor Gas, as applicable, written notice of such act or omission
        and
        the Company or Nicor Gas, as applicable, fails to cure such act or omission
        within the 30-day period after such notice, or (ii) if the Executive first
        acquired knowledge of such act or omission more than 6 months before the
        Executive gives the Company or Nicor Gas, as applicable, such notice, or
        (iii)
        if the Executive has consented in writing to such act or omission 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:
 
 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.. Notwithstanding
        the foregoing provisions in this Section 4.6, the Company and Nicor Gas, as
        applicable, may suspend the Executive from performing his duties under this
        Agreement following the delivery of a Notice of Termination by the Executive
        without Good Reason; provided, however, that during the period of suspension
        (which shall end on the Termination Date), the Executive shall continue to
        be
        treated as employed by the Company and Nicor Gas, as applicable, for other
        purposes, and his rights to compensation or benefits shall not be reduced
        by
        reason of the suspension.
 
 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 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 other provision of this section to the contrary,
        to
        the extent any portion of such release is subject to the seven-day revocation
        period prescribed by the Age Discrimination in Employment Act, as amended,
        or to
        any similar revocation period in effect on the Termination Date, no payment
        shall be due under this Section 5.1 until such revocation period has
        expired without such revocation occurring.
 
 5.1.1  The
        Company shall, within five business days of such termination of employment,
        pay
        the Executive a cash payment equal to the sum of the following
        amounts:
 
 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; and
 
 5.1.1.3  all
        amounts previously deferred by or accrued to the benefit of the Executive
        under
        any nonqualified deferred compensation plan sponsored by the Company (including,
        without limitation, any vested amounts deferred under incentive plans), together
        with any accrued earnings thereon, and not yet paid by the Company;
        and
 
 5.1.1.4  an
        amount
        equal to the product of (A) two (2) multiplied by (B) the sum of
        (i) the Executive’s Annual Base Salary, and (ii) the Severance
        Incentive.
 
 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 termination of
        employment 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 employment
        termination (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 termination of employment, except for
        an amendment adopted in accordance with Section 11.7 of this Agreement and
        that by its specific terms amends this Agreement.
 
 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 fully 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, 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).
 
 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. 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 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 5.1.1.4 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. 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 5.1.1.4 of this Agreement.
 
 5.1.7  On
        the
        Termination Date (i) the Executive shall become fully vested in all
        contributions made by the Company on behalf of the Executive under the Company’s
        Savings Investment Plan (the “SIP”) or any supplemental or successor plan, if
        applicable, and (ii) the Company shall immediately make an additional
        contribution to the SIP (or, if such contribution is not permitted under
        the
        terms of the SIP, to a non-qualified plan providing benefits comparable to
        the
        benefits provided under the SIP) or any supplemental or successor plan, if
        applicable, equal to the aggregate maximum matching contributions which the
        Company would have made on behalf of the Executive to the SIP or any
        supplemental or successor plan, if applicable, for the Severance Period,
        calculated as if the amount payable under subsection 5.1.1.4 of this Agreement
        had been earned equally over the Severance Period and the Executive had made
        the
        maximum allowable voluntary contributions to the SIP or any supplemental
        or
        successor plan, if applicable. In addition, if the Executive is not eligible
        to
        participate in the Company’s defined benefit retirement plan, the Company shall
        also contribute to the SIP or any supplemental or successor plan, if applicable,
        on the Termination Date an amount equal to the aggregate additional “retirement
        growth” contributions which the Company would have made on behalf of the
        Executive for the Severance Period if the amount payable under subsection
        5.1.1.4 of this Agreement had been earned equally over the Severance
        Period.
 
 5.1.8  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 service.
 
 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 other
        than
        for Good Reason), 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 and Nicor Gas, as applicable, and Nicor Gas, as applicable, terminates
        the Executive’s employment by reason of 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, 5.1.1.2 and 5.1.1.3, 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.
  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.
 
 6.2  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 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
        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),
 
 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 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.
 
 ARTICLE VII
 EXPENSES
        AND INTEREST
 
 7.1  Legal
        Fees and Other Expenses .
 
 7.1.1  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), 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.
 
 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 .
        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 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.
 
 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 of its Subsidiaries 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 of its Subsidiaries. Amounts which are vested benefits or
        which
        the Executive is otherwise entitled to receive under any plan of the Company
        or
        any of its Subsidiaries 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 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.
 
 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:
 
 Gerald
        P.
        O’Connor
 1300
        East
        Gartner Road
 Naperville,
        IL 60540
 
 If
        to the
        Company:
 
 Nicor
        Inc.
 1844
        Ferry Road
 Naperville,
        Illinois 60563-9600
 Attn:  Claudia
        J. Colalillo
 
 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.
 
 IN
        WITNESS WHEREOF, the Executive and the Company have executed this Agreement
        as
        of the date first above written.
 
 
 
 
 
 
 /s/
        GERALD P. O’CONNOR
 Gerald
        P.
        O’Connor
 
 
 Nicor
        Inc.
 
 By:
        /s/ THOMAS L. FISHER
 Thomas
        L. Fisher
 Chairman
        and CEO