exh412.htm


    Exhibit 4.12

    

      This instrument was
prepared by and

      after recording
should be mailed to:

       

      Wayne F.
Osoba

      Foley & Lardner
LLP

      321
North Clark Street

      Suite
2800

      Chicago, Illinois
60654-5313

       

      


      


       

        
          

        

      

      


      NORTH
SHORE GAS COMPANY

      to

      U.S.
BANK NATIONAL ASSOCIATION,

      as
successor trustee to CONTINENTAL BANK, NATIONAL ASSOCIATION

      Trustee

      


      _______________

      


      Fifteenth

      SUPPLEMENTAL
INDENTURE

      


      
        _______________

      

      


      Dated
as of November 1, 2008

      


      
        _______________

      

      


      SUPPLEMENTING
THE INDENTURE

      DATED
AS OF APRIL 1, 1955

      AND

      CREATING
FIRST MORTGAGE

      7.00%
BONDS, SERIES O

      


       

        
          

        

      

      



      
        
           


        

        
           


          
            

          

        

        
           


        

      


      Table
of Contents

      


      
      

       

      
        	 	 	 	
                PAGE

              
	 	 
	Article I BONDS OF SERIES
      O	
                 4

              
	 	 Section
      1.01.	 Designation,
      Maturity and Interest Rate of Bonds	
                 4

              
	 	 Section
      1.02.	 Issuance
      of Bonds	
                 5

              
	
                 

              	 Section
      1.03.	 Redemption
      of Bonds by Company	
                 6

              
	 	 Section
      1.04.	 Exchange
      of Bonds	
                 7

              
	
                 

              	 Section
      1.05.	 Notice
      of Redemption	
                 8

              
	 	 Section
      1.06	 Execution
      and Authentication of Bonds	
                 8

              
	 	 Section
      1.07.	 Form
      of Bonds	
                 8

              
	 	 Section
      1.08.	 Definitions	
                 8

              
	 	 Section
      1.09.	 Date
      of Payments	
                 10

              
	 	 Section
      1.10.	 Reservation
      of Right to Amend the Indenture	
                 11

              
	 	 Section
      1.11.	 Private
      Placement of Bonds	
                 13

              
	 	 Section
      1.12.	 Private
      Placement Legend	
                 13

              
	 	 	 	 
	Article II ADDITIONAL
      COVENANTS	
                13

              
	 	 Section 2.01.	 Covenants
      of Company under Indenture	
                13

              
	 	 Section
      2.02.	 Certain
      Restrictions	
                13

              
	 	 Section
      2.03.	 Default;
      Event of Default	
                 14

              
	 	 	 	 
	 Article III
      MISCELLANEOUS	
                14

              
	 	 Section 3.01.	 Terms
      Defined in the Indenture	
                 14

              
	 	 Section
      3.02.	 Recitals
      Not Made by Trustee	
                 14

              
	 	 Section
      3.03.	 Counterparts	
                 14

              
	 	 Section
      3.04.	 Governing
      Law	
                14

              


      

       


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      Fifteenth
Supplemental Indenture, dated as of the 1st day of
November, 2008, by and between NORTH SHORE GAS COMPANY, a corporation duly
organized on October 7, 1963, and existing under and by virtue of the laws of
the State of Illinois (hereinafter sometimes called the “Company”) and U.S. BANK
NATIONAL ASSOCIATION, AS SUCCESSOR TRUSTEE TO CONTINENTAL BANK, NATIONAL
ASSOCIATION, a national banking association organized and existing under the
laws of the United States of America and having its office and place of business
in the City of St. Paul, Minnesota (hereinafter sometimes called the “Trustee”).

       

      WITNESSETH:

       

      WHEREAS, the original North
Shore Gas Company (hereinafter called “North Shore”) heretofore
executed and delivered to the Trustee its Indenture (hereinafter called the
“Original Indenture”),
dated as of April 1, 1955 (the Company acquired the name “North Shore Gas
Company” in 1963, having been previously known as Lake Gas Company, and assumed
the obligations of North Shore under the Original Indenture in that same year),
whereby North Shore granted, bargained, sold, transferred, assigned, pledged,
mortgaged, warranted and conveyed, unto the Trustee and to its successors in
said trust, all property, real, personal and mixed, then owned or thereafter
acquired by it (other than property expressly excepted from the lien thereof) to
be held by said Trustee in trust in accordance with the provisions of the
Original Indenture for the equal proportionate benefit and security of all bonds
issued and to be issued thereunder in accordance with the provisions thereof,
and said Original Indenture provided for the issuance of a series of bonds
designated “First Mortgage 3 1/2% Bonds, Series A”; and

       

      WHEREAS, North Shore has
heretofore executed and delivered to the Trustee its First Supplemental
Indenture, dated as of July 1, 1957, providing for the issuance under the
Original Indenture of a series of bonds designated “First Mortgage 4 3/4% Bonds,
Series B” and its Second Supplemental Indenture, dated as of December 1, 1961,
providing for the issuance under the Original Indenture of a series of bonds
designated “First Mortgage 5% Bonds, Series C”; and

       

       WHEREAS, Lake Gas Company,
having acquired on December 20, 1963, the name of North Shore Gas Company and,
subject to the lien of the Original Indenture, all of its property then subject
to said lien, thereafter, in accordance with the provisions of Article XIV of
the Original Indenture, executed and delivered to the Trustee an indenture
entitled “Third Supplemental Indenture,” dated as of December 20, 1963, whereby,
among other things, the Company assumed and agreed to pay the principal,
premium, if any, and interest of all bonds issued or to be issued under the
Original Indenture and secured thereby, and to perform and fulfill all of the
terms, covenants and conditions of the Original Indenture binding upon North
Shore, and in and by said Third Supplemental Indenture the Company subjected to
the lien of the Original Indenture, subject to the exclusions and exceptions set
forth in said Third Supplemental Indenture, all of the property then owned by
the Company or thereafter acquired by it (other than property of a character
which is excluded from the lien of the Original Indenture), all as more fully
set forth in said Third Supplemental Indenture; and by virtue of all of the
things done as in this paragraph recited, the Company has become the successor
corporation under the Original Indenture subject to all of the terms, conditions
and restrictions thereof, and, in accordance with the provisions of Section 2 of
Article XIV of the Original Indenture, may issue bonds under the Original
Indenture; and

       


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      WHEREAS, thereafter the
Company has made, executed and delivered other indentures supplemental to the
Original Indenture, of which the indentures supplemental to the Original
Indenture, dated, respectively, as of May 1, 1964, as of February 1, 1970, as of
October 1, 1973, as of February 15, 1977, as of September 15, 1980, as of
December 1, 1987, as of November 1, 1990, as of October 1, 1992, as of April 1,
1993, as of December 1, 1998 and as of April 15, 2003 (said Original Indenture,
as so supplemented and amended, being collectively called the “Indenture”); and

       

      WHEREAS, all bonds which have
heretofore been issued and outstanding under the Indenture have been retired and
cancelled, except that as of November 1, 2008, there were bonds of the following
series outstanding in the aggregate principal amounts indicated
below:

       

      
        	
                Bonds

              	 
    	
                Due
      Date

              	 
    	
                Aggregate Principal Amount

              
	
                Series
      M

              	
                    

              	
                December 1, 2028

              	
                    

              	
                $29,045,000

              
	
                Series
      N-2

              	 
    	
                May 1,
      2013

              	 
    	
                $40,000,000

              


      

      


      ;
and

       

      WHEREAS, it is provided in
Article III of the Indenture, that bonds of any series may from time to time be
issued thereunder by the Company in an aggregate principal amount equal to 66
2/3% of the amount of net expenditures for unfunded bondable property as defined
in the Indenture or upon the deposit of cash with the Trustee equal to the
aggregate principal amount of the bonds whose authentication and delivery is
then applied for; and

       

      WHEREAS, the Company has duly
determined to create one additional series of its bonds to be issued under the
Indenture, as supplemented by this Fifteenth Supplemental Indenture, designated
“First Mortgage 7.00% Bonds, Series O” (the “bonds of Series O”) and to issue an
aggregate of $6,500,000 principal amount of said bonds, all of which shall
contain such provisions as are set forth in this Fifteenth Supplemental
Indenture; and

       

      WHEREAS, the Company desires
in and by this Fifteenth Supplemental Indenture to set forth the description of,
confirm unto the Trustee and give further assurance to it with respect to,
certain property heretofore acquired by the Company and now subject to the lien
of the Indenture but not heretofore specifically described herein;
and

       

      WHEREAS, the Company desires
to reserve the right to amend the Indenture without any consent or other action
by holders of the bonds of Series O or any subsequent series, to provide that
the Indenture, the rights and obligations of the Company and the rights of the
bondholders may be modified with the consent of the holders of not less than 60%
in aggregate principal amount of the bonds adversely affected; provided,
however, that no modification shall (1) extend the maturity of any of the bonds
of Series O or reduce the rate or extend the time of payment of interest
thereon, or reduce the amount of principal thereof (or with respect to the bonds
of Series O change the amount or time of any prepayment or payment of principal
or of any payment of interest or reduce the rate of interest or change the
method of computation of interest or of the Make-Whole Amount), or reduce the
Make-Whole Amount, if any, payable on redemption thereof or change the coin or
currency in which any bond or interest thereon or

       


      
        
           


        

        
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      Make-Whole Amount,
if any, is payable without the consent of the holder of each bond so affected,
(2) permit the creation of any lien, not otherwise permitted, prior to or on a
parity with the lien of the Indenture, without the consent of the holders of all
bonds then outstanding, or (3) reduce the above percentage of the aggregate
principal amount of bonds the holders of which are required to approve any such
modification without the consent of the holders of all bonds then outstanding;
and

       

      WHEREAS, the form of
registered bond of Series O and the form of the Trustee’s Certificate to appear
on all bonds of Series O shall be substantially as set forth in Exhibit A, attached
hereto and made a part hereof; and

       

      WHEREAS, all acts and things
necessary to make the bonds of Series O, when authenticated by the Trustee and
issued as in the Indenture and in this Fifteenth Supplemental Indenture
provided, the valid, binding and legal obligations of the Company entitled in
all respects to the security of the Indenture have been done and performed, and
the creation, execution and delivery of this Fifteenth Supplemental Indenture
have in all respects been duly authorized;

       

      NOW, THEREFORE, THIS FIFTEENTH SUPPLEMENTAL
INDENTURE WITNESSETH, that, in order to
further secure the payment of the principal of, premium, if any, and interest on
all bonds at any time issued and outstanding under the Indenture according to
their tenor, purport and effect, and to secure the performance and observance of
all the covenants and conditions therein and in the Indenture contained and for
valuable consideration, the receipt whereof is hereby acknowledged, the Company
does hereby grant, bargain, sell, release, convey, assign, transfer, mortgage,
pledge, set over and confirm and warrant unto the Trustee, the properties which
are described in Schedule 1 which is
annexed hereto and hereby expressly made a part hereof;

       

      TO HAVE AND TO HOLD all of
said properties and all and singular the lands, properties, estates, rights,
franchises and privileges hereby mortgaged, conveyed, pledged or assigned, or
intended so to be, by the Indenture, and this Fifteenth Supplemental Indenture,
together with all appurtenances thereunto appertaining, unto the Trustee and its
successors and assigns forever;

       

      Subject, however,
to permitted encumbrances and liens (as defined in the Indenture) and to the
exceptions set forth in the granting and pledging clauses of the Indenture, and,
as to any property hereafter acquired by the Company, to any liens thereon
existing, and to any liens for unpaid portions of the purchase price placed
thereon at the time of such acquisition, but only to the extent that such liens
are permitted by the Indenture.

       

      IN TRUST, NEVERTHELESS, upon the terms
and trusts in the Indenture and in this Fifteenth Supplemental Indenture set
forth, for the equal and proportionate use, benefit, security and protection of
those who from time to time shall hold the bonds and coupons authenticated and
delivered under the Indenture and as supplemented by this Fifteenth Supplemental
Indenture and as may hereafter be further amended and supplemented, and duly
issued by the Company, without any discrimination, preference or priority of any
bond or coupon over any other by reason of priority in time of issue, sale or
negotiation thereof or otherwise, except as provided in

       


      
        
           


        

        
          3

          
            

          

        

        
           


        

      


      the Indenture, so
that, subject to said provisions, each and all of said bonds and coupons shall
have the same right, lien and privilege under the Indenture and any indenture
supplemental thereto and shall be equally secured thereby (except as any
sinking, amortization, improvement, renewal or other fund, established in
accordance with the provisions of the Indenture or any indenture supplemental
thereto, may afford additional security for the bonds of any particular series),
and in trust for enforcing the payment of the principal of the bonds and of the
interest thereon according to the tenor, purport and effect of the bonds and
coupons and of the Indenture and for enforcing the terms, provisions, covenants
and stipulations in the Indenture, and in this Fifteenth Supplemental Indenture
and in the bonds set forth.

       

      UPON CONDITION that, until the
happening of an Event of Default (as defined in Section 1 of Article X of the
Indenture), the Company shall be suffered and permitted to possess, use and
enjoy said properties, except as limited in respect of money, securities and
other personal property pledged or deposited with or required to be pledged or
deposited with the Trustee, and to receive and use the rents, issues, income,
revenues, earnings and profits therefrom.

       

      IT IS HEREBY COVENANTED, DECLARED AND AGREED by and
between the Company and the Trustee, and its successor or successors in trust,
as follows:  

       

       

      ARTICLE
I

       

      BONDS
OF SERIES O

       

      Section
1.01.   Designation, Maturity and Interest
Rate of Bonds.

       

      There is hereby
created and authorized one new series of bonds which shall be designated First
Mortgage 7.00% Bonds, Series O, due November 1, 2013.  The aggregate
principal amount of bonds of Series O which may be executed by the Company and
authenticated by the Trustee shall be limited to $6,500,000 (exclusive of bonds
authenticated and delivered upon transfers pursuant to Section 1.04 of Article I
hereof and Sections 9, 10, 11 and 12 of Article II of the Original Indenture and
delivered pursuant to Section 2 of Article VI of the Original Indenture as the
same may relate to fully registered bonds); provided, however, that no more than
$6,500,000 aggregate principal amount of bonds of Series O shall be outstanding
at any given time.  All bonds of Series O shall be registered bonds
without coupons and shall be dated as provided in Section 1 of Article II of the
Indenture and so long as there is no existing default in the payment of interest
upon the bonds of Series O, any bond of Series O issued after the close of
business on any Record Date, as hereinafter defined, with respect to any
interest payment date (May 1 or November 1, as the case may be) and prior to
such interest payment date shall be dated as of such interest payment date;
provided, however, that if and to the extent that the Company shall default in
the payment of interest due on such interest payment date, then any such bond of
Series O shall bear interest from May 1 or November 1, as the case may be, being
the interest payment date for bonds of Series O to which interest has previously
been paid or made available for payment on the outstanding bonds of said series,
or if the Company shall default in the payment of interest on the first interest
payment date for bonds of Series O, then from the date of the commencement of
the first interest period of such bonds of Series O, which date shall be the
date of initial issuance of the bonds of Series O.

       


      
        
           


        

        
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      All bonds of Series
O shall bear interest from the date thereof (provided, however, that with
respect to the initial interest period ending on May 1, 2009, interest shall
accrue from November 3, 2008), payable at or before 9:00 a.m. Chicago time
on May 1 and November 1 in each year, commencing May 1, 2009, until the
principal thereof shall have become due and payable, at the rate of 7.00% per
annum, and on any overdue principal and (to the extent that payment of such
interest is enforceable under the applicable law) on any overdue installment of
interest at the Overdue Rate.  “Overdue Rate” shall mean the rate of
interest that is the greater of (i) 1% per annum above the rate of interest
stated as the coupon rate of the bonds of Series O or (ii) 1% over the rate of
interest publicly announced by Citibank N.A. in New York, New York as its “base”
or “prime” rate.  Subject to Section 9 of the Bond Purchase
Agreement, the bonds of Series O shall be payable both as to principal and
interest, and as to Make-Whole Amount, if any, in coin or currency of the United
States of America which at the time of payment is legal tender for the payment
of public and private debts, at the office or agency of the Trustee in St. Paul,
Minnesota.

       

      Subject to Section
9 of the Bond Purchase Agreement, so long as there is no existing default in the
payment of interest on the bonds of Series O, the interest payable on any
interest payment date shall be paid to the person in whose name any bond of
Series O is registered at the close of business on the Record Date with respect
to such interest payment date, and such person shall be entitled to receive the
interest payable on such interest payment date notwithstanding the cancellation
of any such bond of Series O on any exchange or transfer of registration thereof
subsequent to the Record Date and prior to such interest payment date, except as
and to the extent the Company shall default in the payment of interest due on
such interest payment date, in which event such defaulted interest shall be paid
to the person in whose name each bond of Series O is registered on the close of
business on a subsequent Record Date, which shall not be less than five (5) days
prior to the date of payment of such defaulted interest, established by notice
given by mail by or on behalf of the Company to the persons in whose names such
bonds of Series O are registered and to the Trustee not less than ten (10) days
preceding such subsequent Record Date.

       

      As
used in this Section 1.01, the term “Record Date” means, with
respect to any interest payment date (May 1 or November 1, as the case may be),
the fifteenth day of April or the fifteenth day of October, as the case may be,
next preceding such interest payment date, or, if such fifteenth day of April or
fifteenth day of October is not a Business Day, the Business Day next preceding
such fifteenth day of April or fifteenth day of October, or with respect to the
payment of defaulted interest, the date established by the Company as
hereinabove provided.

       

      As
used in this Section 1.01, the term “default in the payment of
interest” means failure to pay interest on the applicable interest
payment date disregarding any period of grace permitted by the Indenture, as
amended and supplemented.

       

      Section
1.02.   Issuance of
Bonds.

       

      Bonds of Series O
may be issued only as registered bonds without coupons (hereinafter sometimes
referred to as “registered bonds”), and they shall be substantially in the form
set forth in Exhibit
A.  They shall be issuable in denominations which shall be
multiples of $100,000 and any integral multiple thereof and the execution by the
Company of any bond of Series O shall

       


      
        
           


        

        
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      evidence
conclusively the due authorization of the denomination of such
bond.  Each registered bond of Series O shall be dated as of the date
of the interest payment date on which interest was paid on other bonds of said
Series next preceding the date of issue of such registered bond, except that (i)
so long as there is no existing default in the payment of interest upon the
bonds of Series O, any bond of Series O issued after the close of business on
any record date with respect to any interest payment date and prior to such
interest payment date, shall be dated as of such interest payment date, and (ii)
any bond of Series O issued on an interest payment date on which interest on
other bonds of Series O was paid shall be dated as of the date of issue and
(iii) any bond of Series O issued before the initial interest payment date,
shall be dated the date of commencement of the first interest period for the
bonds of Series O, unless (i) above is applicable.

       

      The registered
owner of any bond of Series O dated as of an interest payment date as provided
in (i) above shall, if the Company shall default in the payment of interest due
on such interest payment date and such default shall be continuing, be entitled
to exchange such bond for a bond or bonds of Series O of the same aggregate
principal amount dated as of the interest payment date next preceding the
interest payment date first mentioned in this sentence, or, if the Company shall
default in the payment of interest on the first interest payment date for bonds
of Series O, such owner shall be entitled to exchange such bond for a bond or
bonds of Series O of the same aggregate principal amount dated the date of
initial issuance of the bonds of Series O.  If the Trustee shall have
knowledge at any time that any registered owner of a bond of Series O shall be
entitled by the provision of the next preceding sentence to exchange such bond,
the Trustee shall within thirty (30) days mail to such owner at the address of
such owner appearing upon the registry book, a notice informing such owner that
such owner has such right of exchange.

       

      Section
1.03.   Redemption of Bonds by
Company.

       

      (a) The bonds of
Series O are subject to mandatory redemption in whole, upon the notice and in
the manner and with the effect provided in the Indenture, at a redemption price
equal to 100% of the principal amount thereof, plus accrued interest, if any, to
the redemption date, but without premium, in the event that all or substantially
all of the mortgaged property shall be sold or taken by the power of eminent
domain or otherwise.

       

      (b)(i) The Company
may, at its option, upon notice as provided below, prepay at any time all, or
from time to time any part of, the bonds of Series O, in an amount not less than
10% of the aggregate principal amount of the bonds of Series O then outstanding
in the case of a partial prepayment, at 100% of the principal amount so prepaid,
together with interest accrued and unpaid thereon to the date of such
prepayment, and the Make-Whole Amount determined for the prepayment date with
respect to such principal amount.  The Company will give each holder
of bonds of Series O written notice of each optional prepayment under this
Section 1.03(b)(i) not less than 30 days and not more than 60 days prior to
the date fixed for such payment.  Each such notice shall specify such
date (which shall be a Business Day), the aggregate principal amount of the
bonds of Series O to be prepaid on such date, the principal amount of each bond
of Series O held by each holder to be prepaid (determined in accordance with
this Section 1.03(b)(ii)), and the interest to be paid on the prepayment
date with respect to such principal amount being prepaid, and shall be
accompanied by a certificate of a Senior Financial Officer as to
the

       


      
        
           


        

        
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      estimated
Make-Whole Amount due in connection with such prepayment (calculated as if the
date of such notice were the date of the prepayment), setting forth the details
of such computation.  Two Business Days prior to such prepayment, the
Company shall deliver to each holder of bonds of Series O a certificate of a
Senior Financial Officer specifying the calculation of such Make-Whole Amount as
of the specified prepayment date.

       

      (ii) In the case of
each partial prepayment of the bonds of Series O pursuant to this
Section 1.03(b), the principal amount of the bonds of Series O to be
prepaid shall be allocated among all of the bonds of Series O at the time
outstanding in proportion, as nearly as practicable, to the respective unpaid
principal amounts thereof not theretofore called for prepayment.

       

      (c) In the case of
each prepayment of bonds of Series O pursuant to Section 1.03(a) or (b),
the principal amount of each bond of Series O to be prepaid shall mature and
become due and payable on the date fixed for such prepayment (which shall be a
Business Day), together with interest on such principal amount accrued to such
date and the applicable Make-Whole Amount, if any.  From and after
such date, unless the Company shall fail to pay such principal amount when so
due and payable, together with the interest and Make-Whole Amount, if any, as
aforesaid, interest on such principal amount shall cease to
accrue.  Any bond of Series O paid or prepaid in full shall be
surrendered to the Company and cancelled and shall not be reissued, and no bond
of Series O shall be issued in lieu of any prepaid principal amount of any
bond of Series  O.

       

      (d) The Company
will not and will not permit any Affiliate to purchase, redeem, prepay or
otherwise acquire, directly or indirectly, any of the outstanding bonds of
Series O except (1) upon the payment or prepayment of the bonds of Series O in
accordance with the terms of this Supplemental Indenture and the bonds of Series
O or (2) pursuant to an offer to purchase made by the Company or an Affiliate
pro rata to the holders of all bonds of Series O at the time outstanding upon
the same terms and conditions.  Any such offer shall provide each
holder with sufficient information to enable it to make an informed decision
with respect to such offer, and shall remain open for at least 15 Business
Days.  If the holders of more than 10% of the principal amount of the
bonds of Series O then outstanding accept such offer, the Company shall promptly
notify the remaining holders of such fact and the expiration date for the
acceptance by holders of bonds of Series O of such offer shall be extended by
the number of days necessary to give each such remaining holder at least 5
Business Days from its receipt of such notice to accept such
offer.  The Company will promptly cancel all bonds of Series O
acquired by it or any Affiliate pursuant to any payment, prepayment or purchase
of bonds of Series O pursuant to any provision of this Supplemental Indenture
and no bonds of Series O may be issued in substitution or exchange for any such
bonds of Series O.

       

      Bonds of Series O
shall be redeemable pursuant to Section 1.03(a) upon the notice provided for in
Section 1.05 of this Article I.

       

      Section
1.04.   Exchange of
Bonds.

       

      In
the manner prescribed in the Indenture, the holder of a registered bond or bonds
of Series O may, at the office or agency of the Trustee in the City of St. Paul,
State of Minnesota,

       


      
        
           


        

        
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      surrender such bond
or bonds in exchange for a like aggregate principal amount of one or more
registered bonds of Series O of any authorized denomination or
denominations.

       

      No
charge will be made by the Company to the registered owner of a bond of Series O
for the transfer thereof or for the exchange thereof for bonds of Series O of
other authorized denominations, except, in the case of transfer, a charge
sufficient to reimburse the Company for any stamp or other tax or governmental
charge required to be paid by the Company or the Trustee.

       

      Section
1.05.   Notice of
Redemption.

       

      If
bonds of Series O are to be redeemed as provided in Section 1.03(a) of this
Article I, written notice of redemption shall be mailed by or on behalf of the
Company, postage prepaid, at least thirty (30) days and not more than sixty (60)
days prior to such date of redemption, to the registered owners of all bonds of
Series O to be so redeemed, at their respective addresses appearing upon the
registry book and in the manner provided in Section 13 of the Bond Purchase
Agreement.  Any notice which is mailed as herein provided shall be
conclusively presumed to have been properly and sufficiently given on the date
of such mailing, whether or not the holder receives the notice.  In
any case, failure to give due notice by mail, or any defect in the notice, to
the registered owners of any bonds of Series O designated for redemption as a
whole or in part, shall not affect the validity of the proceedings for the
redemption of any other bond of Series O.  In case of any redemption
of bonds of Series O by the Trustee pursuant to the provisions of the Indenture
or any indenture supplemental thereto, notice of redemption shall be given in a
similar manner by the Trustee.

       

      Except as provided
above, the provisions of Article VI of the Indenture shall apply to any
redemption of the bonds of Series O under Section 1.03 hereof.

       

      Section
1.06.   Execution and Authentication of
Bonds.

       

      Upon the execution
and delivery of this Fifteenth Supplemental Indenture and upon compliance with
the applicable provisions of the Indenture, as supplemented by this Fifteenth
Supplemental Indenture, the Company shall execute and deliver to the Trustee and
the Trustee shall authenticate and deliver to or upon the written order of the
President, Executive Vice President, Chief Financial Officer, Treasurer or a
Vice President of the Company, bonds of Series O in an aggregate principal
amount of $6,500,000.  All bonds of Series O shall be executed on
behalf of the Company by the manual signature of its President, Executive Vice
President, Chief Financial Officer, Treasurer or a Vice President of the Company
and its corporate seal shall be impressed or imprinted and attested by the
manual signature of its Secretary or one of its Assistant Secretaries, and be
authenticated by the manual execution by the Trustee of the certificate endorsed
on said bonds of Series O.

       

      Section
1.07.   Form of Bonds.

       

      Bonds of Series O
issued will be substantially in the form of Exhibit A attached
hereto.  Bonds of Series O shall bear a private placement
legend.

       

      Section
1.08.   Definitions.

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

       

      In
this Supplemental Indenture, the following terms shall have the meanings
specified in this Section 1.08, unless the context otherwise
requires:

       

      “Affiliate” shall have the
meaning assigned thereto in the Bond Purchase Agreement.

       

      “Bond Purchase Agreement”
means that certain Bond Purchase Agreement dated as of November 3, 2008 between
the Company and the Institutional Investors named on Schedule A thereto, under
and pursuant to which the bonds of Series O were issued, as the same may from
time to time be amended or supplemented.

       

      “Business Day” means any day
which is not a Sunday or a legal holiday or a day (including Saturday) on which
banking institutions in Chicago, Illinois, in New York, New York, and in the
city where the Principal Office of the Trustee is located are not required or
authorized to remain closed and other than a day on which the New York Stock
Exchange is not closed.

       

      “Institutional Investor”
shall have the meaning assigned thereto in the Bond Purchase
Agreement.

       

      “Make-Whole Amount” means,
with respect to any bond of Series O, an amount equal to the excess, if any, of
the Discounted Value of the Remaining Scheduled Payments with respect to the
Called Principal of such bond over the amount of such Called Principal; provided
that the Make-Whole Amount may in no event be less than zero.  For the
purposes of determining the Make-Whole Amount, the following terms have the
following meanings:

       

      “Called Principal” means,
with respect to any bonds of Series O, the principal of such bond of Series O
that is to be prepaid pursuant to Section 1.03(b).

       

      “Discounted Value” means,
with respect to the Called Principal of any bond of Series O, the amount
obtained by discounting all Remaining Scheduled Payments with respect to such
Called Principal from their respective scheduled due dates to the Settlement
Date with respect to such Called Principal, in accordance with accepted
financial practice and at a discount factor (applied on the same periodic basis
as that on which interest on the bond of Series O is payable) equal to the
Reinvestment Yield with respect to such Called Principal.

       

      “Reinvestment Yield” means,
with respect to the Called Principal of any bond of Series O, 0.50% (50 basis
points) over the yield to maturity implied by (i) the yields reported as of
10:00 a.m. (New York City time) on the second Business Day preceding the
Settlement Date with respect to such Called Principal, on the display designated
as “Page PX1” (or such other display as may replace Page PX1) on Bloomberg
Financial Markets for the most recently issued actively traded on the run U.S.
Treasury securities having a maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date, or (ii) if such yields are not
reported as of such time or the yields reported as of such time are not
ascertainable (including by way of interpolation), the Treasury Constant
Maturity Series Yields reported, for the latest day for which such yields have
been so reported as of the second Business Day preceding the Settlement Date
with respect to such Called Principal, in Federal Reserve Statistical Release
H.15 (or any comparable successor publication) for U.S. Treasury securities
having a constant

       


      
        
           


        

        
          9

          
            

          

        

        
           


        

      


      maturity equal to
the Remaining Average Life of such Called Principal as of such Settlement
Date.  In the case of each determination under clause (i) or clause
(ii), as the case may be, of the preceding paragraph, such implied yield will be
determined, if necessary, by (a) converting U.S. Treasury bill quotations to
bond-equivalent yields in accordance with accepted financial practice and (b)
interpolating linearly between (1) the applicable U.S. Treasury security with
the maturity closest to and greater than such Remaining Average Life and (2) the
applicable U.S. Treasury security with the maturity closest to and less than
such Remaining Average Life.  The Reinvestment Yield shall be rounded
to the number of decimal places as appears in the interest rate of the
applicable bond of Series O.

       

      “Remaining Average Life”
means, with respect to any Called Principal, the number of years (calculated to
the nearest one-twelfth year) obtained by dividing (a) such Called Principal
into (b) the sum of the products obtained by multiplying (i) the principal
component of each Remaining Scheduled Payment with respect to such Called
Principal by (ii) the number of years (calculated to the nearest one-twelfth
year) that will elapse between the Settlement Date with respect to such Called
Principal and the scheduled due date of such Remaining Scheduled
Payment.

       

      “Remaining Scheduled
Payments” means, with respect to the Called Principal of any bond of
Series O, all payments of such Called Principal and interest thereon that would
be due after the Settlement Date with respect to such Called Principal if no
payment of such Called Principal were made prior to its scheduled due date;
provided that if such Settlement Date is not a date on which interest payments
are due to be made under the terms of the bonds of Series O, then the amount of
the next succeeding scheduled interest payment will be reduced by the amount of
interest accrued to such Settlement Date and required to be paid on such
Settlement Date pursuant to Section 1.03(b).

       

      “Settlement Date” means, with
respect to the Called Principal of any bond of Series O, the date on which such
Called Principal is to be prepaid pursuant to Section 1.03(b).

       

      “Overdue Rate” means that
rate of interest that is the greater of (i) 1% per annum above the rate of
interest stated in clause (a) of the first paragraph of the bonds of Series O or
(ii) 1% over the rate of interest publicly announced by Citibank N.A. in New
York, New York as its “base” or “prime” rate.

       

      “Securities Act” means the
Securities Act of 1933, as amended.

       

       “Senior Financial
Officer” shall have the meaning assigned thereto in the Bond Purchase
Agreement.

       

      Section
1.09.   Date of
Payments.

       

      In
any case where the date of maturity of interest of the bonds of Series O or the
date fixed for redemption of any bonds of Series O shall be in the location of
the principal office of the Trustee on a day other than a Business Day, then
payment of interest or principal (and Make-

       


      
        
           


        

        
          10

          
            

          

        

        
           


        

      


      Whole Amount, if
any) need not be made on such date but may be made on the next succeeding
Business Day with the same force and effect as if made on the date of maturity
or the date fixed for redemption, and no interest shall accrue for the period
after such date; provided
that if the maturity date of the bonds of Series O is a day other than a
Business Day, the payment otherwise due on such maturity date shall be made on
the next succeeding Business Day and shall include the additional day elapsed in
the computation of interest payable on such next succeeding Business
Day.

       

      Section
1.10.   Reservation of Right to Amend the
Indenture.

       

      The Company
reserves the right, without any consent or other action by holders of the bonds
of Series O, or any subsequent series of bonds, to amend the Indenture by
inserting the following language as Section 4 of Article XVI immediately
following current Section 3 of Article XVI of the Indenture:

       

      “Section
4.   Anything in Section 1 of this Article XVI to the
contrary notwithstanding, with the consent of the holders and registered owners
of not less than sixty per centum (60%) in aggregate principal amount of all the
bonds then outstanding (determined as provided in Section 2 of Article XVII of
this Indenture) or their attorneys-in-fact duly authorized, or, if the rights of
the holders of one or more, but not all, series then outstanding are affected,
the consent of the holders and registered owners of not less than sixty per
centum (60%) in aggregate principal amount of all the bonds then outstanding
(determined as provided in Section 2 of Article XVII of this Indenture) of all
affected series, taken together, and of any other series, the Company, when
authorized by resolution of its Board of Directors, and the Trustee from time to
time and at any time, subject to the restrictions in this Indenture contained,
may enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of any supplemental indenture or modifying the
rights and obligations of the Company and the rights of the holders of any of
the bonds and coupons; provided, however, that no such
supplemental indenture shall (1) extend the maturity of any of the bonds or
reduce the rate or extend the time of payment of interest thereon, or reduce the
amount of the principal thereof  (or with respect to the bonds of
Series O change the amount or time of any prepayment or payment of principal or
of any payment of interest or reduce the rate of interest or change the method
of computation of interest or of the Make-Whole Amount), or reduce the
Make-Whole Amount, if any, or any premium payable on the redemption thereof or
change the coin or currency in which any bond or interest thereon, or Make-Whole
Amount, if any is payable, without the consent of the holder of each bond so
affected, or (2) permit the creation of any lien, not otherwise permitted, prior
to or on a parity with the lien of the Indenture, without the consent of the
holders and registered owners of all the bonds then outstanding, or (3) reduce
the aforesaid percentage of the aggregate principal amount of bonds the holders
and registered owners of which are required to approve any such supplemental
indenture, without the consent of the holders of all the bonds then
outstanding.  For the purposes of this Section 4, bonds shall be
deemed to be affected by a supplemental indenture if, in the opinion of the
Trustee, such supplemental indenture would adversely affect or diminish the
rights of holders thereof against the Company or against its
property.

       


      
        
           


        

        
          11

          
            

          

        

        
           


        

      


      Upon the written
request of the Company, accompanied by a resolution of its Board of Directors
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of bondholders as aforesaid
(the instrument or instruments evidencing such consent to be dated within one
year of such request), the Trustee shall join with the Company in the execution
of such supplemental indenture unless such supplemental indenture affects the
Trustee’s own rights, duties or immunities under this Indenture or otherwise, in
which case the Trustee may in its discretion, but shall not be obligated to,
enter into such supplemental indenture.  The Trustee shall be entitled
to receive and, subject to Section 1 of Article XV hereof, may rely upon, an
opinion of counsel as conclusive evidence that any such supplemental indenture
is authorized or permitted by the provisions of this Section 4.

       

      It
shall not be necessary for the consent of the bondholders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such consent shall approve the substance thereof; provided that the Company
shall or shall cause the Trustee to deliver an execution copy of such
Supplemental Indenture to each of the bond holders.

       

      The Company and the
Trustee, if they so elect, and either before or after such 60% or greater
consent has been obtained, may require the holder or registered owner of any
bond consenting to the execution of any such supplemental indenture to submit
its bond to the Trustee or to such bank, banker or trust company as may be
designated by the Trustee for the purpose, for the notation thereon of the fact
that the holder or registered owner of such bond has consented to the execution
of such supplemental indenture, and in such case such notation, in form
satisfactory to the Trustee, shall be made upon all bonds so submitted, and such
bonds bearing such notation shall forthwith be returned to the persons entitled
thereto; provided, with
respect to the bonds of Series O, that if the holder of any bond is an
Institutional Investor which certifies in writing that it has at a minimum net
worth of at least $50,000,000, such holder may not surrender its bond for such
notation but shall be deemed to have consented to the execution of such
Supplemental Indenture.  All subsequent holders and registered owners
of bonds bearing such notation shall be deemed to have consented to the
execution of such supplemental indenture, and consent, once given or deemed to
be given, may not be withdrawn.

       

      Prior to the
execution by the Company and the Trustee of any supplemental indenture pursuant
to the provisions of this Section 4, the Company shall publish a notice, setting
forth in general terms the substance of such supplemental indenture, at least
once in one daily newspaper of general circulation in each city in which the
principal of any of the bonds shall be payable, or, if all bonds outstanding
shall be registered bonds without coupons or coupon bonds registered as to
principal, such notice shall be sufficiently given if mailed, first class,
postage prepaid, and registered to each registered holder of bonds at the last
address of such holder appearing on the registry books and at the last address
of such holder as provided in Section 13 of the Bond Purchase Agreement, such
publication or mailing, as the case may be, to be made not less than thirty (30)
days prior to such execution.  Any failure of the Company to give such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.”

       


      
        
           


        

        
          12

          
            

          

        

        
           


        

      


      Section
1.11.   Private Placement of Bonds.

       

      Bonds of Series O
shall initially be offered and sold in reliance on the exemption contained under
Section 4(2) of the Securities Act to an institution which is an “accredited
investor” as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act.

       

      Section
1.12.   Private Placement
Legend.

       

      Each bond of Series
O shall bear a legend in substantially the following form:

       

      THIS SECURITY HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF
ANY OTHER STATE.  NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, SUCH REGISTRATION.

       

       

      ARTICLE
II


       

       

      ADDITIONAL
COVENANTS

       

      Section
2.01.   Covenants of Company under
Indenture.

       

      The Company
covenants that, so long as any bonds of Series O are outstanding, the Company
will comply with and observe the covenants, terms and provisions contained in
Section 10 of Article IV of the Indenture which covenants, terms and provisions
shall remain in effect and shall be for the benefit of the holders of the bonds
of Series O as well as the bonds of Series M and the bonds of Series
N-2.

       

      Section
2.02.   Certain
Restrictions.

       

      So
long as any bonds of Series O are outstanding, the Company will not declare or
pay any dividends (other than dividends payable solely in its common stock) or
make any distribution of any kind on, or make any expenditures to purchase,
redeem or retire (other than by exchange for other shares, or through the
application of the net cash proceeds of the sale of other shares, exchanged or
sold after the date of the initial issuance of any bonds of Series O), any
shares of its common stock if:

       

      
        	
                 
      

              	
                (a)

              	
                after giving
      effect to the dividend, distribution, or expenditure concerned, the
      aggregate amount thereof (except to the extent hereinbefore in this
      section excepted from the effect hereof) shall be in excess of the sum of
      $500,000 plus (or, in the event such accumulated surplus earnings shall be
      a negative amount, minus) the surplus earnings of the Company, determined
      in accordance with generally accepted accounting principles, accumulated
      subsequent to September 30, 1980;
or

              


      

       

      
        
           

        

        
          13

          
            

          

        

        
           

        

         

        
           

          
            	
                     
      

                  	
                    (b)

                  	
                    any event of
      default hereunder shall then exist or thereby occur or an event shall have
      occurred or a situation shall then exist which by lapse of time alone
      would become an event of default
hereunder.

                  


          

           

        

      

      “Surplus earnings” for
purposes of this Section 2.02 shall be deemed to mean net earnings, as defined
in paragraph 12 of Article I of the Indenture, less all applicable interest
charges and less all taxes on income not deducted in computing said net
earnings.

       

      Section
2.03.   Default; Event of
Default.

       

      The term “default” or “event of default” wherever
used in this Fifteenth Supplemental Indenture shall mean any one or more of the
events set forth in Article X of the Indenture.

       

       

      ARTICLE
III


       

       

      MISCELLANEOUS

       

      Section
3.01.   Terms Defined in the
Indenture.

       

      For all purposes of
this Fifteenth Supplemental Indenture, all terms herein contained shall, except
as the context may otherwise require or as provided herein, have the meanings
given to such terms in the Indenture.

       

      Section
3.02.   Recitals Not Made by
Trustee.

       

      The recitals
contained in this Fifteenth Supplemental Indenture are made by the Company and
not by the Trustee; and all of the provisions contained in the Indenture in
respect of the rights, privileges, immunities, powers and duties of the Trustee
shall be applicable in respect hereof as fully and with like effect as set forth
herein in full.

       

      Section
3.03.   Counterparts.

       

      This Fifteenth
Supplemental Indenture may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original and shall
constitute but one and the same instrument.

       

      Section
3.04.   Governing Law.

       

      This Fifteenth
Supplemental Indenture shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of
Illinois, excluding choice-of-law principles of such State that would permit the
application of the laws of a jurisdiction other than such State.

       


      
        
           


        

        
          14

          
            

          

        

        
           


        

      


      IN
WITNESS WHEREOF, the Company has caused this instrument to be executed in its
corporate name by its President, Executive Vice President, Chief Financial
Officer, Treasurer or a Vice President and its corporate seal to be hereunto
affixed and to be attested by its Secretary or an Assistant Secretary, and said
U.S. Bank National Association, as successor trustee to Continental Bank,
National Association, to evidence its acceptance of its trust hereby created,
has caused this instrument to be executed in its corporate name by an Executive
Vice President or one of its Vice Presidents and its corporate seal to be
hereunto affixed and to be attested by an Assistant Secretary, in several
counterparts, all as of the day and year first above written.

       

      
        	 
    	 
    	
                North
      Shore Gas Company

              
	 
    	 
    	 
    
	 
    	 
    	 
    
	
                (SEAL)

              	 
    	
                By:______________________                                                              

              
	 
    	 
    	
                Bradley A.
      Johnson

              
	 
    	 
    	
                 Its:
      Treasurer

              
	 
    	 
    	 
    
	
                Attest:

              	 
    	 
    
	 
    	 
    	 
    
	________________________________
      	 
    	 
    
	
                Barth J.
      Wolf

              	 
    	 
    
	
                Its:  Secretary

              	 
    	 
    
	 
    	 
    	
                U.S.
      Bank National Association, as Successor Trustee to Continental Bank,
      National Association

              
	 
    	 
    	 
    
	 
    	 
    	 
    
	
                (SEAL)

              	 
    	
                By:_____________________                                                              

              
	 
    	 
    	
                Richard Prokosch

              
	 
    	 
    	
                Its:  Vice
      President

              
	 
    	 
    	 
    
	
                Attest:

              	 
    	 
    
	 
    	 
    	 
    
	_________________________________
      	 
    	 
    
	
                Raymond
      Haverstock

              	 
    	 
    
	
                Its:  Vice
      President

              	 
    	 
    
	 
    	 
    	 
    


      

      



      
        
           


        

        
          15

          
            

          

        

        
           


        

      


      State of
Wisconsin               )

      )  SS.

      County of
______                 )

       

      I,
___________________, a Notary public in and for said County, in the State
aforesaid, Do Hereby Certify that Bradley A. Johnson and Barth J. Wolf,
personally known to me to be the same persons whose names are subscribed to the
foregoing instrument, and personally known to me to be the duly qualified and
acting Treasurer and Secretary, respectively, of North Shore Gas Company,
appeared before me this day in person, and acknowledged that they signed, sealed
and delivered the said instrument as their free and voluntary acts as such
Treasurer and Secretary, respectively, and as the free and voluntary act of said
North Shore Gas Company, for the uses and purposes therein set
forth.

       

      In
witness whereof, I have hereunto set my hand and have affixed my Notarial Seal
this ____ day of November, 2008.

       

      


      ______________________

      Notary
Public

       

      My
commission expires _______________, ____

       

      



      
        
           


        

        
          16

          
            

          

        

        
           


        

      


      State of
_______                
 )

      )  SS.

      County of
_______             
 )

       

      I,
___________________, a Notary public in and for said County, in the State
aforesaid, do hereby certify that Richard Prokosch and Raymond Haverstock,
personally known to me to be the same persons whose names are subscribed to the
foregoing instrument, and personally known to me to be the duly qualified and
acting Vice President and Vice President, respectively, of U.S. Bank National
Association, as successor trustee to Continental Bank, National Association,
appeared before me this day in person, and acknowledged that they signed, sealed
and delivered the said instrument as their free and voluntary acts as such Vice
President and Vice President, respectively, and as the free and voluntary act of
said U.S. Bank National Association, for the uses and purposes therein set
forth.

       

      In
witness whereof, I have hereunto set my hand and have affixed my Notarial Seal
this ____ day of November, 2008.

       

      


      _________________________

      Notary
Public

       

      My
commission expires _______________, ____

       

      


       


      
        
           


        

        
          17

          
            

          

        

        
           


        

      


      SCHEDULE
1

      


      EASEMENTS
AND OTHER INTERESTS IN LAND

      


      All rights of way,
easements, franchises, licenses, permits, privileges, leases, leaseholds and
other authority granted to the Company for the purpose of constructing,
installing, operating, using, maintaining, renewing, replacing or relocating gas
mains, pipelines, services and other facilities on, over or in private property
owned by others and situated in the County of Cook in the State of Illinois,
including, without limiting the generality of the foregoing, those certain
easements granted to the Company by the grantors hereinafter named and filed for
record and recorded as hereinafter set forth, to wit:

       


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      Exhibit
A

      


      (Form of Series O
Registered Bond Without Coupons)

       

      THIS SECURITY HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF
ANY OTHER STATE.  NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, SUCH REGISTRATION.

       

      


      ICC Identification
No. 6499

      CUSIP:  662325
B*9

      


      No.
R-___

       

      $. . . . . .
..

      


      NORTH SHORE GAS
COMPANY

       

      FIRST MORTGAGE
7.00% BONDS,

       

      SERIES
O

       

      DUE NOVEMBER
1,  2013

       

      NORTH SHORE GAS
COMPANY, an Illinois corporation (hereinafter called the “Company”), for value
received, hereby promises to pay to. . . . . . . . . . . . . . . . . . . . . . .
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ., or registered
assigns on November 1, 2013, unless this Bond shall have been called for
redemption and payment of the redemption price shall have been duly made or
provided for in accordance with the hereinafter described Indenture, the
principal sum of . . . . . . . . . . . . . . . Dollars
($            ), and
to pay interest on the balance of said principal sum from time to time remaining
unpaid from May 1 or November 1 to which interest has been paid next preceding
the date of authentication of this Bond, unless this Bond is authenticated on
May 1 or November 1 to which interest has been paid, in which event this Bond
shall bear interest from such May 1 or November 1, or unless no interest has
been paid on this Bond, in which event this Bond shall bear interest from the
date hereof (provided, however, that with respect to the initial interest period
ending on May 1, 2009, interest shall accrue from November 3, 2008), at the
rate of Seven Per Cent (7.00%) per annum (calculated on the basis of a year of
360 days consisting of twelve 30-day months), payable at or before 9:00 a.m.,
Chicago time, on May 1 or November 1 of each year, commencing May 1, 2009 until
payment in full of such principal sum.  Interest shall also accrue on
any overdue principal, Make-Whole Amount, if any, and (to the extent that such
interest shall be legally enforceable) on any overdue installment of interest
until paid at the Overdue Rate.  Overdue Rate shall mean the rate of
interest that is the greater of (i) 1% per annum above the rate of interest
stated as the coupon rate of the bonds of Series O or (ii) 1% over the rate
of interest publicly announced by Citibank N.A. in New York, New York as
its

       


      
        
           


        

        
          A-1

          
            

          

        

        
           


        

      


      “base” or “prime”
rate.  Subject to Section 9 of the Bond Purchase Agreement, the bonds
of Series O shall be payable both as to principal and interest, and as to
Make-Whole Amount (as hereinafter defined), if any, in coin or currency of the
United States of America which at the time of payment is legal tender for the
payment of public and private debts, at the office or agency of the Trustee in
St. Paul, Minnesota.

       

      This Bond is one of
the First Mortgage Bonds of the Company, all issued and to be issued in series,
from time to time, under and in accordance with and, irrespective of the time of
issue or of the series in which issued or the designation thereof, equally
secured by the Indenture dated as of April 1, 1955 (the “Original Indenture”),
as supplemented and amended by supplemental indentures dated as of July 1, 1957,
as of December 1, 1961, as of December 20, 1963, as of May 1, 1964, as of
February 1, 1970, as of October 1, 1973, as of February 15, 1977, as of
September 15, 1980, as of December 1, 1987, as of November 1, 1990, as of
October 1, 1992, as of April 1, 1993, as of December 1, 1998, as of April 15,
2003 and the Supplemental Indenture dated as of November 1, 2008 relating to the
hereinafter described Series O Bonds (the “Supplemental
Indenture”).  Unless otherwise defined herein, all capitalized terms
used herein shall have the meanings ascribed thereto in the Supplemental
Indenture.  The word “Indenture”, as used in this Bond, shall mean
said Original Indenture, as amended and supplemented from time to time by
indentures supplemental thereto, including the Supplemental
Indenture.  The word “Company”, as used in this Bond, shall be
construed to include any successor corporation, as defined in the
Indenture.  The word “Trustee”, as used in this Bond, shall be
construed to mean and include U.S. Bank National Association (successor to
Continental Bank, National Association), as trustee under the Indenture, and any
successor trustee thereunder.  Reference is hereby made to the
Indenture and all indentures supplemental thereto for a description of the
property mortgaged and pledged (except that certain parcels described in the
Indenture and in said supplemental indentures have been released from the lien
of the Indenture pursuant to the terms thereof), the nature and extent of the
security and the terms and conditions governing the issuance and security of the
bonds issued or to be issued under the Indenture.  As provided in the
Indenture, the bonds may be for various principal sums, are issuable in series,
may bear interest at different rates and may otherwise vary as provided
therein.  This Bond is one of the series of such First Mortgage Bonds
designated as “First Mortgage 7.00% Bonds, Series O”, hereinafter called the
“Series O Bonds”.

       

      The Series O Bonds
shall be deliverable in the form of registered Bonds without coupons in the
denominations of $100,000 and any integral multiple thereof.

       

      As
more fully described in the Supplemental Indenture, the Company reserves the
right, without any consent or other action by holders of the Series O Bonds or
the bonds of any subsequent series, to amend the Indenture to provide that the
Indenture, the rights and obligations of the Company and the rights of the
bondholders may be modified with the consent of the holders of not less than 60%
in aggregate principal amount of the bonds adversely affected; provided,
however, that no modification shall (1) extend the maturity of any of the Series
O Bonds or reduce the rate or extend the time of payment of interest thereon, or
reduce the amount of principal thereof (or with respect to the Series O Bonds
change the amount or time of any prepayment or payment of principal or of any
payment of interest or reduce the rate of interest or change the method of
computation of interest or of the Make-Whole Amount), or reduce the Make-Whole
Amount, if any, payable on redemption thereof or change the coin or currency
in

       


      
        
           


        

        
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      which any bond or
interest thereon or Make-Whole Amount, if any, is payable without the consent of
the holder of each bond so affected, (2) permit the creation of any lien, not
otherwise permitted, prior to or on a parity with the lien of the Indenture,
without the consent of the holders of all bonds then outstanding, or (3) reduce
the above percentage of the principal amount of bonds the holders of which are
required to approve any such modification without the consent of the holders of
all bonds then outstanding.

       

      The Series O Bonds
are subject to mandatory redemption in whole, upon the notice and in the manner
and with the effect provided in the Indenture, at a redemption price equal to
100% of the principal amount thereof, plus accrued interest, if any, to the
redemption date in the event that all or substantially all of the mortgaged
property shall be sold or taken by the power of eminent domain or
otherwise.

       

      Notice of any
mandatory redemption of the Series O Bonds shall be given by mailing by
first-class mail, postage prepaid, at least thirty (30) days and not more than
sixty (60) days prior to the redemption date, to the holders of all such bonds
to be redeemed at their last addresses that shall appear upon the registry book,
all as more fully provided in the Indenture.  Notice of redemption
having been duly given, the bonds called for redemption shall become due and
payable upon the redemption date and, if the redemption price shall have been
deposited with the Trustee, interest thereon shall cease to accrue on and after
the redemption date, and whenever the redemption price thereof shall have been
deposited with the Trustee and notice of redemption shall have been duly given
or provision therefore made, such bonds shall no longer be entitled to any lien
or benefit of the Indenture.

       

      The Company may, at
its option, upon notice as provided in the Supplemental Indenture, prepay at any
time all or from time to time, any part of the Series O Bonds at 100% of the
principal amount so prepaid, and the Make-Whole Amount, determined in accordance
with Section 1.03(b) of the Supplemental Indenture with respect to such
principal amount together with accrued and unpaid interest
thereon.  Reference is made to the Supplemental Indenture for the
terms and conditions of such prepayment and the definition of Make-Whole
Amount.

       

      In
case of certain events of default specified in the Indenture, the principal of
all bonds issued and outstanding thereunder may be declared or may become due
and payable in the manner and with the effect provided in the
Indenture.

       

      No
recourse shall be had for the payment of the principal of, Make-Whole Amount, if
any, or interest on this Bond, or for any claim based hereon, or otherwise in
respect hereof or of the Indenture, to or against any incorporator, stockholder,
director or officer, past, present or future, of the Company, either directly or
through the Company, under any constitution or statute or rule of law or by the
enforcement of any assessment or penalty or otherwise, all such liability of
incorporators, stockholders, directors and officers being released by the holder
hereof by the acceptance of this Bond, and being likewise waived and released by
the terms of the Indenture.

       

      This Bond is
transferable by the registered holder hereof in person or by a duly authorized
attorney at the office or agency of the Trustee in the City of St. Paul, State
of Minnesota, upon surrender and cancellation of this Bond, and thereupon a new
registered bond

       


      
        
           


        

        
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      or
bonds, without coupons, of the same series and for the same aggregate principal
amount will be issued to the transferee in exchange herefor.

       

      The Company and the
Trustee and any paying agent may deem and treat the person in whose name this
Bond is registered as the absolute owner hereof for the purpose of receiving
payment and for all other purposes and neither the Company nor the Trustee nor
any paying agent shall be affected by any notice to the contrary.

       

      This Bond shall not
be entitled to any security or benefit under the Indenture, and shall not become
valid or obligatory for any purpose, until this Bond shall have been
authenticated by the execution of the certificate, hereon endorsed, by the
Trustee or its successor in trust under the Indenture.

       

      This Bond shall be
construed and enforced in accordance with, and the rights of the Company and the
holder of this Bond shall be governed by, the law of the State of Illinois,
excluding choice-of-law principles of such State that would permit the
application of the laws of a jurisdiction other than such State.

       

      In
witness whereof, the Company has caused this Bond to be executed in its name by
its President, Executive Vice President, Chief Financial Officer, Treasurer or a
Vice President manually or in facsimile, and has caused its corporate seal
manually or in facsimile to be hereto affixed, attested by the manual or
facsimile signature of its Secretary or of an Assistant Secretary.

       

      Dated:  ____________________

       

      North
Shore Gas Company

       

      By:_____________________________                                                                    

      Its:_____________________________                                                                    

       

      Attest:

       

      By:_____________________                                                              

      Its:_____________________                                                              

       

      (Form of Trustee’s
Certificate)

       

      This bond is one of
the bonds of the series designated, referred to and described in the
within-mentioned Indenture.

       

      U.S.
Bank National Association

       

      By: ___________________                                                                   

      Authorized Officer


      
        
           


        

        
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      _____________

       

      ASSIGNMENT

       

      For value received,
the undersigned hereby sell(s) and transfer(s) unto:

       

      PLEASE INSERT
IDENTIFYING NUMBER OF
ASSIGNEE:____________________________________________________

       

      _____________________________________________________________________________________________________________________________


      (Please print or
typewrite name and address, including zip code of assignee)

       

      the within Bond and
all rights thereunder, hereby irrevocably constituting and appointing
___________ Attorney to transfer said Note on the books of the Trustee with full
power of substitution in the premises.

       

      Dated:___________________                                                      

       

      ________________________

      Notice: The
signature to this Assignment must correspond with the name as written upon the
face of the within instrument in every particular, without alteration or
enlargement, or any changes whatever.

       


      
        
           


        

        
          A-5