AMENDED
AND RESTATED


CHANGE-IN-CONTROL
AGREEMENT




THIS
AGREEMENT dated as of December 17, 2007 (the “Agreement Date”) is made by and
among Nicor Inc. (the “Company”), an Illinois corporation, and Rocco J.
D’Alessandro (the “Executive”).




Executive
and the Company have previously entered into a Change-in-Control Agreement dated
November 22, 2002 (the “Prior Agreement”).  The Company and Executive
desire to amend and restate the Prior Agreement to conform to the requirements
of Section 409A of the Code.




ARTICLE
I


PURPOSES




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, 2008.  As of December 31, 2008, 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.  “Board”
means the board of directors of the Company.




1


2.3.  “Change
in Control” means the occurrence of a “change in the ownership,” a “change in
the effective control” or a “change in the ownership of a substantial portion of
the assets” of an entity, as determined in accordance with this
Section.  In determining whether an event shall be considered a
“change in the ownership,” a “change in the effective control” or a “change in
the ownership of a substantial portion of the assets” of an entity, the
following provisions shall apply:




2.3.1  A “change
in the ownership” of the Company shall occur on the date on which any one
person, or more than one person acting as a group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (a
“Person”)), acquires ownership of the equity securities of the Company that,
together with the equity securities held by such Person, constitutes more than
50% of the total fair market value or total voting power of the Company, as
determined in accordance with Treas. Reg. §1.409A-3(i)(5)(v).  If a
Person is considered either to own more than 50% of the total fair market value
or total voting power of the equity securities of the Company, or to have
effective control of the Company within the meaning of Section 2.3.2, and such
Person acquires additional equity securities of the Company, the acquisition of
additional equity securities by such Person shall not be considered to cause a
“change in the ownership” of the Company.




2.3.2  A “change
in the effective control” of the Company shall occur on either of the following
dates:




2.3.2.1  The date
on which any Person, acquires (or has acquired during the 12-month period ending
on the date of the most recent acquisition by such Person) ownership of stock of
the Company possessing 30% or more of the total voting power of the Company’s
equity securities, as determined in accordance with Treas. Reg.
§1.409A-3(i)(5)(vi).  If a Person is considered to possess 30% or more
of the total voting power of the Company’s equity securities, and such Person
acquires additional stock of the Company, the acquisition of additional stock by
such Person shall not be considered to cause a “change in the effective control”
of the Company; or




2.3.2.2  The date
on which a majority of the members of the Board is replaced during any 12-month
period by directors whose appointment or election is not endorsed by a majority
of the members of the Board before the date of the appointment or election, as
determined in accordance with Treas. Reg. §1.409A-3(i)(5)(vi).




2.3.3  A “change
in the ownership of a substantial portion of the assets” of the Company shall occur on the date on
which any one Person acquires (or has acquired during the 12-month period ending
on the date of the most recent acquisition by such Person) assets from the
Company that have a total gross fair market value equal to or more than 40% of
the total gross fair market value of all of the assets of the Company
immediately before such acquisition or acquisitions, as determined in
accordance with Treas. Reg. §1.409A-3(i)(5)(vii).  A transfer of
assets shall not be treated as a “change in the ownership of a substantial
portion of the assets” when such transfer is made to an entity that is
controlled by the holders of the Company’s equity securities, as determined in
accordance with Treas. Reg. §1.409A-3(i)(5)(vii)(B).




2


2.3.4  Notwithstanding
the foregoing, the following acquisitions shall not constitute a Change in
Control: (i) an acquisition by the Company or entity controlled by the Company,
or (ii) an acquisition by an employee benefit plan (or related trust) sponsored
or maintained by the Company or any entity controlled by the
Company.




2.3.5  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.




2.4.  “Code”
means the Internal Revenue Code of 1986, as amended.




2.5.  “Effective
Date” means the first date during the Agreement Term on which a Change in
Control occurs.




2.6.  “Employment
Period” means the period commencing on the Effective Date and ending on the
two-year anniversary of that date.




2.7.  “Incentive
Plan” shall have the meaning set forth in Section 3.2.2.




2.8.  “Payment
Date” means the date on which all of the following are complete (i) the
Termination Date, (ii) the execution of the release required pursuant to Section
5.1, and (iii) the expiration of the required revocation period specified in the
release without revocation occurring.




2.9.  “Plans”
shall have the meaning set forth in Section 3.2.3.




2.10.  A
“Potential Change in Control” shall exist during any period in which the
circumstances described in Sections 2.10.1, 2.10.2, or 2.10.3 exist
(provided, however, that a Potential Change in Control shall cease to exist not
later than the occurrence of a Change in Control):




2.10.1  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 2.10.1 shall cease to exist upon the expiration
or other termination of all such agreements.




2.10.2  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 2.10.2 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.




2.10.3  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 2.10.3 shall cease to exist upon a reasonable
determination by the Board




3
 
 
  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.


2.11.  “Separation
from Service” means the termination of Executive’s services to the Company and
all Subsidiaries, whether voluntarily or involuntarily, other than by reason of
death, in accordance with Treas. Reg. §1.409A-1(h).




2.12.  “Severance
Incentive” means the greater of (i) the target annual incentive under an
Incentive Plan applicable to the Executive for the Performance Period (as such
term is defined in Section 3.2.2) 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.




2.13.  “Severance
Period” means the period beginning on the Executive’s Termination Date and
ending on the third 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).




2.14.  “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).




2.15.  “Termination
Date” means the first day on or after which the Executive has a Separation from
Service.




2.16.  “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





4


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 theChiefExecutive 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 (including, without limitation, the Nicor Inc.
Salary Deferral Plan and the Nicor Inc. Stock Deferral Plan) (“Plans”)
applicable generally to other senior executives of the Company, but in no event
shall such Plans provide the Executive with incentive





5


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.  The
Executive shall be entitled to receive prompt reimbursements for all reasonable
expenses incurred by the Executive during the Employment Period 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.  All such expenses
shall be reimbursed no later than the date six (6) months following the
Termination Date.  The amount of expenses reimbursed in one year shall
not affect the amount eligible for reimbursement in any subsequent
year.




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.




6


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;




7


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:




4.4.1  a
material diminution in the Executive’s base compensation;




4.4.2  a
material diminution in the authority, duties or responsibilities of the
Executive;




4.4.3  a
material change, of not less than 25 miles, in the geographic location at which
the Executive must provide services; or




4.4.4  any other
action or inaction that constitutes a material breach by the Company of this
Agreement;




provided,
however, that the above conditions, as applicable, shall not constitute Good
Reason: (i) unless the Executive gives the Company or Nicor Gas, as applicable,
written notice of such condition and the Company or Nicor Gas, as applicable,
fails to remedy the condition within 30 days of such notice; (ii) if the initial
existence of the condition is more than 90 days before the Executive gives the
Company or Nicor Gas such notice; or (iii) if the Executive has consented in
writing to such condition 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:




8


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.




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 within 60 days
following his Termination Date 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 provisions to the contrary, no payments
shall be made or other benefits arise pursuant to this Section 5.1 unless and
until such binding release is effective.  If such release is not
delivered by the Executive within 60 days following the Executive’s Termination
Date, all rights of the Executive with respect to this Agreement and any
benefits hereunder shall be forfeited.




5.1.1  The
Company shall, within five business days of the Payment Date, pay the Executive
a cash payment equal to the sum of the following amounts:




9


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;




5.1.1.3  an amount
equal to the product of (A) three (3) multiplied by (B) the sum of
(i) the Executive’s Annual Base Salary, and (ii) the Severance
Incentive; and




5.1.1.4  an amount
equal to the sum of (A) the balance of the Executive’s accounts forfeited under
the Company’s Savings Investment Plan, or any successor plan, if applicable
(“SIP”) and the Nicor Gas Supplementary Savings Plan (“SSIP”) as a result of
termination of employment, and (B) the sum of (i) the aggregate maximum matching
contributions which the Company would have made on behalf of the Executive to
the SIP and the SSIP for the Severance Period, calculated as if the amount
payable under subsection 5.1.1.3 of this Agreement had been earned equally over
the Severance Period and the Executive had made the maximum allowable voluntary
contributions to the SIP and SSIP, and (ii) the aggregate additional “retirement
growth” contributions, if any, which the Company would have made on behalf of
the Executive for the Severance Period to the SIP and SSIP if the amount payable
under subsection 5.1.1.3 of this Agreement had been earned equally over the
Severance Period.  For purposes of calculating the amount that would
be contributed to the SIP and SSIP for the Severance Period under this Section
5.1.1.4(B), the limits contained in the plan documents and Internal Revenue Code
Sections 415, 402(g) and 401(a)(17), for the year of termination shall
apply.




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 Separation from
Service 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 Separation
from Service (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 Separation from
Service, except for an amendment adopted in accordance with Section 11.7 of
this Agreement and that by its specific terms amends this
Agreement.




10




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 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, deferred dividends, 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).  Notwithstanding the foregoing, to the extent such awards are
subject to performance criteria, a prorated calculation of the target value of
such awards shall be performed and forfeiture conditions shall lapse only with
respect to the portion of such awards attributable to such prorated
value.




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.  All such benefit payments shall be made no later than December
31 of the year following the year in which the expense was
incurred.  The amount of benefits provided in one year shall not
affect the amounts provided in any subsequent year.  Such benefits
shall not be subject to liquidation or exchange for another
benefit.  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





11





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 5.1.1.3 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.




5.1.7  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 5.1.1.3 of this Agreement.




5.1.8  During
the Severance Period, 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
services.  The amount of expenses incurred in one year shall not
affect the amounts paid in any subsequent year.




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), 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 or Nicor Gas, as applicable,
terminates the Executive’s employment by reason of




12





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, and 5.1.1.2, 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.




13


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.




6.1.3  All
determinations by the Company’s auditors under this Section 6.1 shall be made
using reasonable good faith interpretations of the Code, the regulations and
other guidance issued thereunder.




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





14





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





15





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),




16




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





17





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.




6.8.  Payments.  All
amounts payable to Executive under Section 6.1, 6.3 or 6.6 shall be paid as soon
as practicable after a Change in Control or other event giving rise to any
payment of the Excise Tax by the Executive, but no later than the December 31 of
the year next following the year in which the Executive, or the Company on
behalf of the Executive, remits the Excise Tax.




ARTICLE
VII


EXPENSES
AND INTEREST




7.1.  Legal
Fees and Other Expenses.




7.1.1  During
the Employment Period and for a period of ten (10) years following the
Termination Date, 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), then 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.  All such expenses shall be reimbursed by December 31
of the year following the year in which the expense was incurred.  The
amount of expenses reimbursed in one year shall not affect the amount eligible
for reimbursement in any subsequent year.




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.  Except for any
required delay under Section 11.16, 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





18





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.  To the extent Executive receives
severance or similar payments and/or benefits under any other plan, program,
agreement, policy, practice, or the like of Nicor Gas, the Company or any
Subsidiary, or under the WARN Act or similar state law, the payments and
benefits due to Executive under this Agreement will be correspondingly reduced
on a dollar-for-dollar basis (or vice-versa).




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
Subsidiary 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 Subsidiary.  Amounts which are
vested benefits or which the Executive is otherwise entitled to receive under
any plan of the Company or any Subsidiary 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





19





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.




20




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:




Rocco J.
D’Alessandro


2178
Fargo Blvd.


Geneva,
IL 60134





If to the
Company:




Nicor
Inc.


1844
Ferry Road


Naperville,
Illinois 60563-9600


Attn:  Claudia
J. Colalillo




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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.  No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement.  This
Agreement supersedes the Prior Agreement, which shall no longer be in force or
have any effect.




11.16.  Section
409A Compliance.




11.16.1  To the
extent applicable, this Agreement shall be interpreted in accordance with
Internal Revenue Code Section 409A and Department of Treasury regulations and
other interpretive guidance issued thereunder.  If the Company
determines that any compensation or benefits payable under this Agreement do not
comply with Code Section 409A and related Department of Treasury guidance, the
Company and Executive agree to amend this Agreement or take such other actions
as the Company deems necessary or appropriate to comply with the requirements of
Code Section 409A while preserving the economic agreement of the
parties.




11.16.2     
Notwithstanding any provision to the contrary in this Agreement, if Executive is
deemed at the time of his separation from service to be a “specified employee”
for purposes of Section 409A(a)(2)(B)(i) of the Code, to the extent delayed
commencement of any portion of the benefits to which Executive is entitled under
Section 5.1 or 5.4 of this Agreement





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is
required in order to avoid a prohibited distribution under Section
409A(a)(2)(B)(i) of the Code, such portion of the benefits payable to Executive
under Section 5.1 or 5.4 shall not be paid prior to the earlier of (a) the
expiration of the six-month period measured from the date of Executive’s
Separation from Service or (b) Executive’s death.  Upon the expiration
of the applicable Code Section 409A(a)(2)(B)(i) deferral period, all payments
deferred pursuant to this Section 11.16 shall be paid in a lump sum and any
remaining payments due under the Agreement shall be paid as otherwise provided
herein.  Notwithstanding anything herein to the contrary, to the
maximum extent permitted by applicable law, amounts payable to Executive
pursuant to Sections 5.1 or 5.4 herein shall be made in reliance upon Treas.
Reg. Section 1.409A-1(b)(9) (Separation Pay Plans) or Treas. Reg. Section
1.409A-1(b)(4) (Short-Term Deferrals) and such amounts shall not be delayed
pursuant to this Section 11.16.2.




IN
WITNESS WHEREOF, the Executive and the Company have executed this Agreement as
of the date first above written.




/s/ ROCCO J. D'ALESSANDRO


Rocco J.
D’Alessandro








Nicor
Inc.





By: /s/ RUSS M. STROBEL


Russ M.
Strobel


Chairman, President
and Chief Executive Officer











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