Document:

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

       

      
        
           

        

        
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      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

       

      
        
           

        

        
          A-2

          
            

          

        

        
           

        

      

      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

       

      
        
           

        

        
          A-3

          
            

          

        

        
           

        

      

      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

      
        
           

        

        
          A-4

          
            

          

        

        
           

        

      

       

      _____________

       

      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-5exh101.htm

    Exhibit 10.1

    

     

    EXECUTIVE
EMPLOYMENT

    AND
SEVERANCE AGREEMENT

     

    By
and Between

     

    INTEGRYS
ENERGY GROUP, INC.

     

    And

     

    ___________________________

     

    As
Amended and Restated Effective January 1, 2009

     

    

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    Table of
Contents

     

    
    

     

    
      	Section	 	
               Page

            
	 	 	 
	1. 	 Definitions	
                  2

            
	 	 (a)	Act 	
               2

            
	
               

            	 (b)	
              Affiliate and
      Associate

            	
               2

            
	 	 (c)	Beneficial Owner	
               3

            
	 	 (d)	Cause	
               4

            
	 	 (e)	Change
      in Control of the Company	
               5

            
	 	 (f)	Code	
               6

            
	 	 (g)	Continuing Director	
               6

            
	 	 (h)	Covered
      Termination	
               6

            
	 	 (i)	Employment Period	
               6

            
	 	 (j)	Good
      Reason	
               7

            
	 	 (k)	Normal
      Retirement Date	
               8

            
	 	 (l)	Person	
               8

            
	
               

            	 (m)	Separation from
    Service	
               8

            
	 	 (n)	Termination of
      Employment	
               9

            
	
               

            	 (o)	Termination Date	
               10

            
	 2.	Termination
      or Cancellation Prior to Change in Control 	
               13

            
	 3.   	Employment
    Period 	
               14

            
	 4.	Duties 	
               14

            
	 5.	Compensation 	
               15

            
	 6.	Annual Compensation
      Adjustments 	
               18

            
	
               7.

            	Termination For Cause or
      Without Good Reason 	
               18

            
	 8.	Termination Giving Rise to a
      Termination Payment 	
               18

            
	 9.	Payments Upon
      Termination 	
               20

            
	
               

            	 (a)	Accrued
      Benefits	
              20

            
	 	 (b)	Termination Payment	
               21

            
	 10.	 Death	
              27

            
	 11.	 Retirement	
               27

            
	 12.	 Termination for
      Disability	
               28

            
	 13.	 Termination Notice and
      Procedure	
               28

            
	 14.	 Further Obligations of
      the Executive	
               29

            
	 	 (a)	Competition 	
               29

            
	 	 (b)	Confidentiality	
               30

            
	 15.	 Expenses and
      Interest	
               30

            
	 16.	 Payment Obligations
      Absolute	
              31

            
	 17.	 Successors	
               31

            
	 18.	 Severability	
               33

            
	 19.	 Amendment	
               33

            
	 20.	 Withholding	
               33

            
	 21.	 Certain Rules of
      Construction	
               33

            
	 22.	 Governing Law;
      Resolution of Disputes	
               34

            
	 23.	 Notice	
               34

            
	
               24.

            	 No Waiver	
               35

            

    

     

    
    

     

    
      
        -i-

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    
    

     

    
      	 25.	Headings 	
               35

            
	
               26.

            	Code
      Section 409A Compliance	
              35

            

    

     

    
 

    
      
        -ii-

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXECUTIVE EMPLOYMENT AND
SEVERANCE AGREEMENT

     

     

    THIS AGREEMENT,
made and entered into as of the _____ day of _______________, 2008, by and
between Integrys Energy Group, Inc., a Wisconsin corporation (hereinafter
referred to as the “Company”), and ____________________ (hereinafter referred to
as “Executive”).

     

    W I T N E S S E T
H

     

    WHEREAS, the
Executive and the Company are parties to a Key Executive Employment and
Severance Agreement that was originally effective as of May 2,
1997;

     

    WHEREAS, the
Executive is employed by the Company and/or a subsidiary of the Company (the
“Employer”) in a key executive capacity and the Executive’s services are
valuable to the conduct of the business of the Company;

     

    WHEREAS, the
Executive possesses intimate knowledge of the business and affairs of the
Company and has acquired certain confidential information and data with respect
to the Company;

     

    WHEREAS, the
Company desires to insure, insofar as possible, that it will continue to have
the benefit of the Executive’s services and to protect its confidential
information and goodwill;

     

    WHEREAS, the
Company recognizes that circumstances may arise in which a change in control of
the Company occurs, through acquisition or otherwise, thereby causing current
uncertainty about the Executive’s future employment with the Employer without
regard to the Executive’s competence or past contributions, which uncertainty
may result in the loss of valuable services of the Executive to the detriment of
the Company and its shareholders, even if such a change in control never does in
fact occur, and the Company and the Executive wish to

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    provide reasonable
security to the Executive against changes in the Executive’s relationship with
the Company in the event of certain changes in control;

     

    WHEREAS, the
Company and the Executive are desirous that any proposal for a change in control
or acquisition of the Company will be considered by the Executive objectively
and with reference only to the best interests of the Company and its
shareholders;

     

    WHEREAS, the
Executive will be in a better position to consider the Company’s best interests
if the Executive is afforded reasonable security, as provided in this Agreement,
against altered conditions of employment which could result from any such change
in control or acquisition; and

     

    WHEREAS, it is
desirable to amend and restate the Key Executive Employment and Severance
Agreement between the Executive and the Company;

     

    NOW, THEREFORE, in
consideration of the foregoing and of the mutual covenants and agreements
hereinafter set forth, the parties hereto mutually covenant and agree as
follows, which shall replace the Key Executive Employment and Severance
Agreement presently in effect between the Executive and the
Company:

     

    1.           Definitions.

     

    (a)           Act.   For
purposes of this Agreement, the term “Act” means the Securities Exchange Act of
1934, as amended.

     

    (b)           Affiliate and
Associate.  An
“Affiliate” of, or a person “affiliated” with, a specified person, is a person
that directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the person specified and the
term “Associate” used to indicate a relationship with any person, means (1) any
corporation or organization (other than the registrant or a majority-owned
subsidiary of the registrant) of which

    

    
      
        
           

        

        
          -2-

          
            

          

        

        
           

        

      

    

    

    such person is an
officer or partner or is, directly or indirectly, the beneficial owner of 10
percent or more of any class of equity securities, (2) any trust or other estate
in which such person has a substantial beneficial interest or as to which such
person serves as trustee or in a similar fiduciary capacity, and (3) any
relative or spouse of such person, or any relative of such spouse, who has the
same home as such person or who is a director or officer of the registrant or
any of its parents or subsidiaries.

     

    (c)           Beneficial
Owner.  For
purposes of this Agreement, a Person shall be deemed to be the “Beneficial
Owner” of any securities:

     

    (i)           which
such Person or any of such Person’s Affiliates or Associates has the right to
acquire (whether such right is exercisable immediately or only after the passage
of time) pursuant to any agreement, arrangement or understanding, or upon the
exercise of conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a
Person shall not be deemed the Beneficial Owner of, or to beneficially own, (A)
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person’s Affiliates or Associates until such
tendered securities are accepted for purchase or (B) securities issuable upon
exercise of any rights agreement that the Company may have in effect at a time
before the issuance of such securities;

     

    (ii)           which
such Person or any of such Person’s Affiliates or Associates, directly or
indirectly, has the right to vote or dispose of or has “beneficial ownership” of
(as determined pursuant to Rule 13d-3 of the General Rules and Regulations under
the Act), including pursuant to any agreement,

    

    
      
        
           

        

        
          -3-

          
            

          

        

        
           

        

      

    

    

    arrangement or
understanding; provided, however, that a
Person shall not be deemed the Beneficial Owner of, or to beneficially own, any
security under this subparagraph (ii) as a result of an agreement, arrangement
or understanding to vote such security if the agreement, arrangement or
understanding: (A) arises solely from a revocable proxy or consent given to such
Person in response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable rules and regulations under the Act and
(B) is not also then reportable on a Schedule 13D under the Act (or any
comparable or successor report); or

     

    (iii)           which
are beneficially owned, directly or indirectly, by any other Person with which
such Person or any of such Person’s Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting
(except pursuant to a revocable proxy as described in Subsection 1(c) (ii)
above) or disposing of any voting securities of the Company.

     

    (d)           Cause.  “Cause”
for termination by the Company of the Executive’s employment in connection with
a Change of Control of the Company shall, for purposes of this Agreement, be
limited to:  (i) the engaging by the Executive in intentional conduct
not taken in good faith which has caused demonstrable and serious financial
injury to the Company, as evidenced by a determination in a binding and final
judgment, order or decree of a court or administrative agency of competent
jurisdiction, in effect after exhaustion or lapse of all rights of appeal, in an
action, suit or proceeding, whether civil, criminal, administrative or
investigative; (ii) conviction of a felony (as evidenced by binding and final
judgment, order or decree of a court of competent jurisdiction, in effect after
exhaustion of all rights of appeal) which substantially impairs the Executive’s
ability to perform his duties or responsibilities; or (iii) continuing willful

    

    
      
        
           

        

        
          -4-

          
            

          

        

        
           

        

      

    

    

    and unreasonable
refusal by the Executive to perform the Executive’s duties or responsibilities
(unless significantly changed without the Executive’s consent).

     

    (e)           Change in Control of the
Company.  For
purposes of this Agreement, a Change in Control of the Company shall be deemed
to have occurred if:

     

    (i)           any
Person (other than any employee benefit plan of the Company or of any subsidiary
of the Company, any Person organized, appointed or established pursuant to the
terms of any such benefit plan or any trustee, administrator or fiduciary of
such a plan) is or becomes the Beneficial Owner of securities of the Company
representing at least 30% of the combined voting power of the Company’s then
outstanding securities;

     

    (ii)           one-half
or more of the members of the Board are not Continuing Directors;

     

    (iii)           there
shall be consummated any merger, consolidation, or reorganization of the Company
with any other corporation as a result of which less than 50% of the outstanding
voting securities of the surviving or resulting entity are owned by the former
shareholders of the Company other than a shareholder who is an Affiliate or
Associate of any party to such consolidation or merger;

     

    (iv)           there
shall be consummated any merger of the Company or share exchange involving the
Company in which the Company is not the continuing or surviving corporation
other than a merger of the Company in which each of the holders of the Company’s
Common Stock immediately prior to the merger have

    

    
      
        
           

        

        
          -5-

          
            

          

        

        
           

        

      

    

    

    the same
proportionate ownership of common stock of the surviving corporation immediately
after the merger;

     

    (v)           there
shall be consummated any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company to a Person which is not a wholly owned subsidiary
of the Company; or

     

    (vi)           the
shareholders of the Company approve any plan or proposal for the liquidation or
dissolution of the Company.

     

    (f)           Code.  For
purposes of this Agreement, the term “Code” means the Internal Revenue Code of
1986, including any amendments thereto or successor tax codes
thereof.

     

    (g)           Continuing
Director.  For
purposes of this Agreement, the term “Continuing Director” means (i) any member
of the Board of Directors of the Company who was a member of such Board on the
date of this Agreement, (ii) any successor of a Continuing Director who is
recommended to succeed a Continuing Director by a majority of the Continuing
Directors then on such Board and (iii) additional directors elected by a
majority of the Continuing Directors then on such Board.

     

    (h)           Covered
Termination.  Except
as provided in Section 2(b) hereof, for purposes of this Agreement, the term
“Covered Termination” means any Termination of Employment where the Termination
Date is any date on or after the date on which a Change in Control of the
Company has occurred and prior to the end of the Employment Period.

     

    (i)           Employment
Period.  For
purposes of this Agreement, the term “Employment Period” means a period
commencing on the date of a Change in Control of the 

    

    
      
        
           

        

        
          -6-

          
            

          

        

        
           

        

      

    

    

    Company, and ending
at 11:59 p.m. Central Time on the earlier of the third anniversary of such date
or the Executive’s Normal Retirement Date.

     

    (j)           Good
Reason.  For
purposes of this Agreement, the Executive shall have a “Good Reason” for
termination of employment in connection with a Change in Control of the Company
in the event of:

     

    (i)           any
breach of this Agreement by the Company, including specifically any breach by
the Company of its agreements contained in Sections 4, 5 or 6
hereof;

     

    (ii)           the
removal of the Executive from, or any failure to reelect or reappoint the
Executive to, any of the positions held with the Company or the Employer on the
date of the Change in Control of the Company or any other positions with the
Company or the Employer to which the Executive shall thereafter be elected,
appointed or assigned, except in the event that such removal or failure to
reelect or reappoint relates to the termination by the Company of the
Executive’s employment for Cause or by reason of disability pursuant to Section
12 hereof;

     

    (iii)           a
good faith determination by the Executive that there has been a significant
adverse change, without the Executive’s written consent, in the Executive’s
working conditions or status with the Company or the Employer from such working
conditions or status in effect during the 180-day period immediately prior to
the Change in Control of the Company, including but not limited to (A) a
significant change in the nature or scope of the Executive’s authority, powers,
functions, duties or responsibilities, or (B) a significant reduction in the
level of

    

    
      
        
           

        

        
          -7-

          
            

          

        

        
           

        

      

    

    

    support services,
staff, secretarial and other assistance, office space and accoutrements;
or

     

    (iv)           failure
by the Company to obtain the agreement referred to in Section 17(a) hereof as
provided therein.

     

    (k)           Normal Retirement
Date.  For
purposes of this Agreement, the term “Normal Retirement Date” means the earlier
of (i) “Normal Retirement Date” as defined in Part A of the Wisconsin
Public Service Corporation Retirement Plan, or any successor plan, as in effect
on the date of the Change in Control of the Company or (ii) such earlier
retirement date chosen by the Executive prior to the commencement of the
Employment Period.

     

    (l)           Person.  For
purposes of this Agreement, the term “Person” shall mean any individual, firm,
partnership, corporation or other entity, including any successor (by merger or
otherwise) of such entity, or a group of any of the foregoing acting in
concert.

     

    (m)           Separation from
Service.  For
purposes of this Agreement, the term “Separation from Service” means the date on
which the Executive has a Termination of Employment or if later, separates from
service (within the meaning of Code Section 409A) from the Company and each
other corporation, trade or business that, with the Company, constitutes a
controlled group of corporations or group of trades or businesses under common
control within the meaning of Code Sections 414(b) or (c).  For this
purpose, Code Sections 414(b) and (c) shall be applied by substituting “at least
50 percent” for “at least 80 percent” each place it
appears.     Specifically, if Executive continues to
provide services to the Company or an affiliate in a capacity other than as an
employee, such shift in status is not automatically a Separation from
Service.

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

    (n)           Termination of
Employment.  For
purposes of this Agreement, the Executive’s “Termination of Employment” shall
occur when the Company and Executive reasonably anticipate that no
further services will be performed by the Executive for the Company after a
certain date or that the level of bona fide services the Executive will perform
after such date as an employee of the Company will permanently decrease to no
more than 20% of the average level of bona fide services performed by the
Executive (whether as an employee or independent contractor) for the Company
over the immediately preceding 36-month period (or such lesser period of
services).  For purposes of this definition, the term Company includes
each other corporation, trade or business that, with the Company, constitutes a
controlled group of corporations or group of trades or businesses under common
control within the meaning of Code Sections 414(b) or (c).  For this
purpose, Code Sections 414(b) and (c) shall be applied by substituting “at least
50 percent” for “at least 80 percent” each place it appears.  An
Executive is not considered to have a Termination of Employment if the Executive
is absent from active employment due to military leave, sick leave or other bona
fide leave of absence if the period of such leave does not exceed the greater of
(i) six months, or (ii) the period during which the Executive’s right to
reemployment by the Company or controlled group member is provided either by
statute or by contract; provided that if the leave of absence is due to a
medically determinable physical or mental impairment that can be expected to
result in death or last for a continuous period of not less than six months,
where such impairment causes the Executive to be unable to perform the duties of
his or her position of employment or any substantially similar position of
employment, the leave may be extended for up to 29 months without causing a
Termination of Employment.  Further, for purposes of determining
whether the Executive has incurred a Termination of Employment, if the Executive
is not actively at work during the period 

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    that there exists a
dispute pursuant to Section 1(o)(v)(B) or (C), the Executive shall be considered
to be on a bona fide leave of absence for which his right to reemployment is
guaranteed during
the period that begins on the date on which the Executive last performs active
services and ends on the Termination Date that ultimately is established
pursuant to Section 1(o)(v)(B) or (C).

     

    (o)           Termination
Date.  For
purposes of this Agreement, except as otherwise provided in Section 2(b),
Section 10(b) and Section 17(a) hereof, the term “Termination Date” means (i) if
the Executive’s employment is terminated by the Executive’s death, the date of
death; (ii) if the Executive’s employment is terminated by reason of voluntary
early retirement, as agreed in writing by the Company and the Executive, the
date of such early retirement which is set forth in such written agreement;
(iii) if the Executive’s employment is terminated for purposes of this Agreement
by reason of disability pursuant to Section 12 hereof, the earlier of thirty
days after the Notice of Termination is given or one day prior to the end of the
Employment Period; (iv) if the Executive’s employment is terminated by the
Executive voluntarily (other than for Good Reason), the date the Notice of
Termination is given; and (v) if the Executive’s employment is terminated by the
Company (other than by reason of disability pursuant to Section 12 hereof) or by
the Executive for Good Reason, the earlier of thirty days after the Notice of
Termination is given or one day prior to the end of the Employment
Period.  Notwithstanding the foregoing,

     

    (A)           If
termination is for Cause pursuant to Section 1(d)(iii) of this Agreement and if
the Executive has cured the conduct constituting such Cause as described by the
Company in its Notice of Termination within such thirty day or shorter period,
then the 

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

    Executive’s
employment hereunder shall continue as if the Company had not delivered its
Notice of Termination.

     

    (B)           If
the Company (or the Employer) shall give a Notice of Termination for Cause or by
reason of disability and the Executive in good faith notifies the Company
that a
dispute exists concerning the termination within the fifteen day period
following receipt thereof, then the Executive may elect to continue his
employment during such dispute, and the Termination Date shall be determined
under this paragraph.  If the Executive so elects and it is thereafter
determined that Cause or disability (as the case may be) did exist, the
Termination Date shall be the earlier of (1) the date on which the dispute is
finally determined, either (x) by mutual written agreement of the parties or (y)
in accordance with Section 22 hereof, (2) the date of the Executive’s death, or
(3) one day prior to the end of the Employment Period.  If the
Executive so elects and it is thereafter determined that Cause or disability (as
the case may be) did not exist, then the employment of the Executive hereunder
shall continue after such determination as if the Company (of the Employer) had
not delivered its Notice of Termination and there shall be no Termination Date
arising out of such Notice.  In either case, this Agreement continues,
until the Termination Date, if any, as if the Company (or the Employer) had not
delivered the Notice of Termination except that, if it is finally determined
that the Company (or the Employer) properly terminated the Executive for the
reason asserted in the Notice of Termination, the Executive shall in no case be
entitled to a Termination Payment (as hereinafter defined) arising out of events
occurring after the Company delivered its Notice of Termination. 

     

    
      
        
        

      

      
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    (C)           If
the Executive shall in good faith give a Notice of Termination for Good Reason
and the Company (or the Employer) notifies the Executive that a dispute exists
concerning the termination within the fifteen day period following receipt
thereof, then the Executive may elect to continue his employment during such
dispute and the Termination Date shall be determined under this
paragraph.  If the Executive so elects and it is
thereafter determined that Good Reason did exist, the Termination Date shall be
the earliest of (1) the date on which the dispute is finally determined, either
(x) by mutual written agreement of the parties or (y) in accordance with Section
22 hereof, (2) the date of the Executive’s death or (3) one day prior to the end
of the Employment Period.  If the Executive so elects and it is
thereafter determined that Good Reason did not exist, then the employment of the
Executive hereunder shall continue after such determination as if the Executive
had not delivered the Notice of Termination asserting Good Reason and there
shall be no Termination Date arising out of such Notice.  In either
case, this Agreement continues, until the Termination Date, if any, as if the
Executive had not delivered the Notice of Termination except that, if it is
finally determined that Good Reason did exist, the Executive shall in no case be
denied the benefits described in Sections 8(b) and 9 hereof (including a
Termination Payment) based on events occurring after the Executive delivered his
Notice of Termination.

     

    (D)           Except
as provided in Paragraph (B) and (C) above, if the party receiving the Notice of
Termination notifies the other party that a dispute exists concerning the
termination within the appropriate period following receipt thereof and it is
finally determined that the reason asserted in such Notice of Termination did
not exist, then (1) if such Notice was delivered by the Executive, the Executive
will be deemed to have 

     

    
      
        
        

      

      
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    voluntarily
terminated his employment and the Termination Date shall be the earlier of the
date fifteen days after the Notice of Termination is given or one day prior to
the end of the Employment Period and (2) if delivered by the Company, the
Company will be deemed to have terminated the Executive other than by reason of
death, disability or Cause.

     

    2.           Termination or Cancellation Prior to Change
in Control.

     

    (a)           Subject
to Subsection 2(b) hereof, the Company (and the Employer) and the Executive
shall each retain the right to terminate the employment of the Executive or
terminate and cancel this Agreement at any time prior to a Change in Control of
the Company.  Subject to Subsection 2(b) hereof, in the event the
Executive’s employment is terminated by the Company (or the Employer) prior to a
Change in Control of the Company, this Agreement shall be terminated and
cancelled and of no further force and effect, and any and all rights and
obligations of the parties hereunder shall cease.  In the event the
Executive’s employment is terminated by the Executive prior to a Change in
Control of the Company, except for obligations of the Executive in Section 14(b)
hereof which shall survive such termination, this Agreement shall be terminated
and cancelled and of no further force and effect and any and all rights and
obligations of the parties except those in Section 14 shall cease.

     

    (b)           Anything
in this Agreement to the contrary notwithstanding, if a Change in Control of the
Company shall occur and if the Executive’s employment with the Company or a
subsidiary of the Company shall have been terminated by the Company or the
Employer (other than a termination due to the Executive’s death or as a result
of the Executive’s disability) or if this Agreement shall have been otherwise
terminated and cancelled by the Company during the period of 180 days prior to
the date on which the Change in Control of the Company shall occur,

     

    
      
        
        

      

      
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    then for all
purposes of this Agreement such termination of employment shall be deemed a
“Covered Termination” (and the Executive’s Termination Date shall be the date of
such termination of employment) and any such termination and cancellation of
this Agreement unless effected in the manner specified in Section 19 hereof,
shall be null and void unless it shall be reasonably demonstrated by the Company
that such termination of employment or termination and cancellation of
this Agreement (i) shall not have been at the request of a third party who had
taken steps reasonably calculated to effect a Change in Control of the Company
or (ii) shall not otherwise have arisen in connection with or in anticipation of
a Change in Control of the Company.

     

    3.           Employment
Period.  If a
Change in Control of the Company occurs when the Executive is employed by the
Company or a subsidiary of the Company, the Company will, or will cause the
Employer to, continue thereafter to employ the Executive during the Employment
Period, and the Executive will remain in the employ of the Employer in
accordance with and subject to the terms and provisions of this
Agreement.  Any termination of the Executive’s employment during the
Employment Period, whether by the Company or the Employer, shall be deemed a
termination by the Company for purposes of this Agreement.

     

    4.           Duties.  During
the Employment Period, the Executive shall, in the same capacities and positions
held by the Executive at the time of the Change in Control of the Company or in
such other capacities and positions as may be agreed to by the Company and the
Executive in writing, devote the Executive’s best efforts and all of the
Executive’s business time, attention and skill to the business and affairs of
the Employer, as such business and affairs now exist and as they may hereafter
be conducted.  The services which are to be performed by the Executive
hereunder are to be rendered in the same metropolitan area in which the
Executive 

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

     

    was employed during
the 180-day period prior to the time of such Change in Control of the Company,
or in such other place or places as shall be mutually agreed upon in writing by
the Executive and the Company from time to time.  Without the
Executive’s consent the Executive shall not be required to be absent from such
metropolitan area more than 45 days in any fiscal year of the
Company.

     

    

    5.           Compensation.  During
the Employment Period, the Executive shall be compensated as
follows:

     

    (a)           The
Executive shall receive, at reasonable intervals (but not less often than
monthly) and in accordance with such standard policies as may be in effect
immediately prior to the Change in Control of the Company, an annual base salary
in cash equivalent of not less than the Executive’s highest annual base salary
as in effect during the 180-day period immediately prior to the Change in
Control of the Company, subject to any deferral election then in effect and
subject to adjustment as hereinafter provided.

     

    (b)           The
Executive shall receive fringe benefits at least equal in value to those
provided for the Executive at any time during the 180-day period immediately
prior to the Change in Control of the Company or, if more favorable to the
Executive, those provided generally at any time during the Employment Period to
executives of the Company (or the Employer) of comparable status and position to
the Executive.  The Executive shall be reimbursed, at such intervals
and in accordance with such standard policies that are most favorable to the
Executive in effect at any time during the 180-day period immediately prior to
the Change in Control of the Company or, if more favorable to the Executive,
those provided generally at any time during the Employment Period to executives
of the Company (or the Employer) of comparable status and position to the
Executive, for any and all monies advanced 

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

     

    in connection with
the Executive’s employment for reasonable and necessary expenses incurred by the
Executive on behalf of the Company, including travel expenses.

     

    (c)           The
Executive shall be included, to the extent eligible thereunder (which
eligibility shall not be conditioned on the Executive’s salary grade or on any
other requirement which excludes persons of comparable status to the Executive
unless such exclusion was in effect for such
plan or an equivalent plan immediately prior to the Change in Control of the
Company), in any and all plans providing benefits for the Employer’s salaried
employees in general, including but not limited to retirement, savings, group
life insurance, hospitalization, medical, dental, profit sharing and stock bonus
plans; provided, that, in no event
shall the aggregate level of benefits under such plans in which the Executive is
included be less than the aggregate level of benefits under plans of the Company
of the type referred to in this Section 5(c) in which the Executive was
participating at any time during the 180-day period immediately prior to the
Change in Control of the Company.

     

    (d)           The
Executive shall annually be entitled to not less than the amount of paid
vacation and not fewer than the number of paid holidays to which the Executive
was entitled annually at any time during the 180-day period immediately prior to
the Change in Control of the Company or such greater amount of paid vacation and
number of paid holidays as may be made available annually to other executives of
the Company (or the Employer) of comparable status and position to the
Executive.

     

    (e)           The
Executive shall be included in all plans providing additional benefits to
executives of the Company of comparable status and position to the Executive,
including but not limited to deferred compensation, split-dollar life insurance,
supplemental retirement, pension restoration, stock option, stock appreciation,
stock bonus and similar or comparable 

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

     

    plans; provided, that, in no event
shall the aggregate level of benefits under such plans be less than the
aggregate level of benefits under plans of the Company of the type referred to
in this Section 5(e) in which the Executive was participating at any time during
the 180-day period immediately prior to the Change in Control of the Company;
and provided,
further, that
the Company’s
obligation to include the Executive in bonus or incentive compensation plans
shall be determined by Subsection 5(f) hereof.

     

    (f)           To
assure that the Executive will have an opportunity to earn incentive
compensation after a Change in Control of the Company, the Executive shall be
included in any bonus plan of the Company or the Employer which shall satisfy
the standards described below (such plan, the “Bonus Plan”) if the Executive was
participating in a bonus plan or plans of the Company or the Employer in effect
at any time during the 180-day period immediately prior to the Change in Control
of the Company.  Bonuses under any such Bonus Plan shall be payable
with respect to achieving such financial or other goals reasonably related to
the business of the Company or the Employer as the Company or the Employer shall
establish (the “Goals”), all of which Goals shall be attainable, prior to the
end of the Employment Period, with approximately the same degree of probability
as the goals under any bonus plan or plans of the Company or the Employer as in
effect at any time during the 180-day period immediately prior to the Change in
Control of the Company (whether one or more, the “Prior Bonus Plan”) and in view
of the Company’s or the Employer’s existing and projected financial and business
circumstances applicable at the time.  The amount of the bonus (the
“Bonus Amount”) that the Executive is eligible to earn under any such Bonus Plan
shall be no less than the amount of the Executive’s target award provided in
such Prior Bonus Plan, and in the event the Goals are not achieved such that the
entire target award is not payable, any such Bonus Plan shall provide for a
payment of a 

     

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

     

    Bonus Amount equal
to a portion of the target award reasonably related to that portion of the Goals
which were achieved.  Payment of the Bonus Amount shall not be
affected by any circumstance occurring subsequent to the end of the Employment
Period, including termination of the Executive’s employment.

     

    

    6.           Annual Compensation
Adjustments.  During
the Employment Period, the Board of Directors of the Company or the Employer (or
an appropriate committee thereof) will consider and appraise, at least annually,
the contributions of the Executive to the Company, and in accordance with the
Company’s or the Employer’s practice prior to the Change in Control of the
Company, due consideration shall be given to the upward adjustment of the
Executive’s base compensation rate, at least annually, (i) commensurate
with increases generally given to other executives of the Company or the
Employer of comparable status and position to the Executive, and (ii) as
the scope of the Company’s or the Employer’s operations or the Executive’s
duties expand.

     

    7.           Termination For Cause or
Without Good Reason.  If
there is a Covered Termination for Cause or due to the Executive’s voluntarily
terminating his employment other than for Good Reason (any such terminations to
be subject to the procedures set forth in Section 13 hereof), then the Executive
shall be entitled to receive only Accrued Benefits pursuant to Section 9(a)
hereof.

     

    8.           Termination Giving Rise to a
Termination Payment.  (a)  If
there is a Covered Termination by the Executive for Good Reason, or by the
Company other than by reason of (i) death, (ii) disability pursuant to Section
12 hereof, or (iii) Cause (any such terminations to be subject to the procedures
set forth in Section 13 hereof), then the Executive shall be entitled to
receive, and the Company shall promptly pay, Accrued Benefits and, in lieu

     

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

     

    of further base
salary for periods following the Termination Date, as liquidated damages and
additional severance pay and in consideration of the covenant of the Executive
set forth in Section 14(a) hereof, the Termination Payment pursuant to Section
9(b) hereof.

    

    (b)           If
there is a Covered Termination and the Executive is entitled to Accrued Benefits
and the Termination Payment, then the Executive shall be entitled to the
following additional benefits:

     

    (i)           The
Executive shall receive, at the expense of the Company, outplacement services,
on an individualized basis at a level of service commensurate with the
Executive’s status with the Company immediately prior to the Change in Control
of the Company (or, if higher, immediately prior to the termination of the
Executive’s employment), provided by a nationally recognized executive placement
firm selected by the Company; provided that the availability of outplacement
services shall not extend beyond December 31 of the second calendar year
following the calendar year in which occurs the Executive’s Separation from
Service; and provided further, that the cost to the Company of such services
shall not exceed 15% of the Executive’s annual base salary in effect immediately
prior to the Change in Control of the Company.

     

    (ii)           Until
the earlier of the end of the Employment Period or such time as the Executive
has obtained new employment and is covered by benefits which in the aggregate
are at least equal in value to the following benefits, the Executive shall
continue to be covered, at the expense of the Company, by the most favorable
life insurance, hospitalization, medical and dental coverage, provided to the
Executive and his family during the 180-day period immediately prior to the

     

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

     

    Change in Control
of the Company or, if more favorable to the Executive, the coverage in effect
generally at any time thereafter for executives of the Company (or the Employer)
of comparable status and position to the Executive and their families, subject
to the following:

     

    (A)           If
applicable, following the end of the COBRA continuation period, if such
hospitalization, medical or dental coverage is provided under a health plan that
is subject to Section 105(h) of the Code, benefits payable under such health
plan shall comply with the requirements of Treasury regulation section
1.409A-3(i)(1)(iv)(A) and (B) and, if necessary, the Company shall amend such
health plan to comply therewith.

     

    (B)           To
the extent required in order to comply with Section 409A of the Code, during the
first six months following the Executive’s Separation from Service, the
Executive shall pay the Company for any life insurance coverage that provides
benefits under a group term life insurance policy.  Promptly following
the end of such six month period, the Company shall make a cash payment to the
Executive equal to the aggregate premiums paid by the Executive for such
coverage, and thereafter such coverage shall be provided at the expense of the
Company for the remainder of the period.

     

    9.           Payments Upon
Termination.

     

    (a)           Accrued
Benefits.  For
purposes of this Agreement, the Executive’s “Accrued Benefits” shall include the
following amounts, payable as described herein: (i) all base salary for the time
period ending with the Termination Date; (ii) reimbursement for any and all
monies advanced in connection with the Executive’s employment for reasonable and
necessary expenses incurred by the Executive on behalf of the Company for the
time period ending with the Termination Date; (iii) any and all other cash
earned through the Termination Date and 

     

    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

     

    deferred at the
election of the Executive or pursuant to any deferred compensation plan then in
effect; (iv) any bonus or incentive compensation otherwise payable to the
Executive with respect to the year in which
termination occurs, or for any prior year or incentive period to the extent that
such bonus or incentive compensation is otherwise payable to the Executive but
has not been previously paid, under any bonus or incentive compensation plan or
plans in which the Executive is a participant; and (v) all other payments and
benefits to which the Executive (or in the event of the Executive’s death, the
Executive’s surviving spouse or other beneficiary) may be entitled as
compensatory fringe benefits or under the terms of any benefit plan of the
Company, other than severance payments under the Company’s (or the Employer’s)
severance policies or practices, in the form most favorable to the Executive
which were in effect at any time during the 180-day period immediately prior to
the Change in Control of the Company or during the Employment
Period.  Payment of Accrued Benefits shall be made promptly in
accordance with the Company’s prevailing practice with respect to Subsections
(i) and (ii) or, with respect to Subsections (iii), (iv) and (v), pursuant to
the terms of the benefit plan or practice establishing such
benefits.  Termination of the Executive’s employment does not affect
deferral or distribution elections that the Executive may have in place with
respect to the payment of any of the Accrued Benefits that are subject to Code
Section 409A, and payment of such amounts will be made pursuant to the terms of
the benefit plan or practice under which the deferral election was
made.

     

    (b)           Termination
Payment.

     

    (i)           Subject
to the limits set forth in Subsection 9(b)(ii) hereof, the Termination Payment
shall be an amount equal to (A) the Executive’s annual base salary, at the
highest rate as in effect at any time during the 180-day period immediately
prior to the Change in Control of the Company, as adjusted upward, from time to
time, pursuant to Section 6 hereof, plus (B) the amount of the average annual
bonus award (determined on an annualized basis for 

     

    
      
        
        

      

      
        -21-

        
          

        

      

      
        
        

      

    

     

    any bonus award
paid for a period of less than one year and excluding any year for which the
Executive did not participate in any bonus plan) paid to the Executive with
respect to the three complete fiscal
years preceding the Termination Date (the aggregate amount set forth in (A) and
(B) hereof shall hereafter be referred to as “Annual Cash Compensation”), times
(C) the lesser of (1) 2.99 and (2) the number of years or fractional portion
thereof remaining in the Employment Period determined as of the Termination
Date.  Long-term incentive awards are not considered for this
purpose.  The Termination Payment shall be paid to the Executive in
cash equivalent on the last business day of the seventh month following the
month in which occurs the Executive’s Separation from Service (or as soon as
practicable after, but in no event later than 21⁄2 months following the scheduled
payment date in the case of an Executive who is deemed to have a Covered
Termination pursuant to Section 2(b)).  Such lump sum payment shall
not be reduced by any present value or similar factor, and the Executive shall
not be required to mitigate the amount of the Termination Payment by securing
other employment or otherwise, nor will such Termination Payment be reduced by
reason of the Executive securing other employment or for any other
reason.  The Termination Payment shall be in lieu of, and acceptance
by the Executive of the Termination Payment shall constitute the Executive’s
release of any rights of Executive to, any other severance payments under any
Company (or Employer) severance policy, practice or agreement; provided that if
the Executive has received severance payments under any other Company (or
Employer) severance policy, practice or agreement prior to the date of the
Termination Payment hereunder, the Termination Payment will be reduced by the
amount of the severance payment received by the Executive under such other
policy, practice or agreement.  The Company shall bear up to $10,000
in the aggregate of fees and expenses of consultants 

     

    
      
        
        

      

      
        -22-

        
          

        

      

      
        
        

      

    

     

    and/or legal or
accounting advisors engaged by the Executive to advise the Executive as to
matters relating to the computation of benefits due and payable under this
Subsection 9(b).

    

    (ii)    (A)           Notwithstanding
any other provision of this Agreement, if any portion of the Termination Payment
or any other payment under this Agreement, or under any other agreement with or
plan of the Company or its affiliates (in its aggregate, “Total Payments”),
would constitute an “excess parachute payment” that is subject to the tax (the
“Excise Tax”) imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the “Code”), or any successor provision, the Company shall pay to the
Executive an additional amount (the “Gross-Up Payment”) such that the sum of (i)
the net amount retained by the Executive after deduction of any Excise Tax and
any interest charges or penalties in respect of the imposition of such Excise
Tax (but not any federal, state or local income tax or employment tax) on the
Total Payments plus (ii) any federal, state and local income tax, employment tax
and Excise Tax upon the payment provided for by this Subsection 9(b)(ii), shall
be equal to the Total Payments.  For purposes of determining the
amount of the Gross-Up Payment, the Executive shall be deemed to pay federal
income taxes and employment taxes at the highest marginal rate of federal income
and employment taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal rates of
taxation in the state and locality of the Executive’s domicile for income tax
purposes on the date the Gross-Up Payment is made, net of the maximum reduction
in federal income taxes that may be obtained from deduction of such state and
local taxes.

     

    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

     

    (B)           For
purposes of this Agreement, the terms “excess parachute payment” and “parachute
payments” shall have the meanings assigned to them in Section 280G of the Code
(or any successor provision) and such “parachute payments” shall be valued as
provided therein.  Present value shall be calculated in accordance
with Section 280G(d)(4) of the Code (or any successor
provision).  Within forty (40) days following the delivery of the
Notice of Termination or notice by the Company to the Executive of its belief
that there is a payment or benefit due the Executive which will result in an
excess parachute payment as defined in Section 280G of the Code (or any
successor provision), or in case the Executive is deemed to have incurred a
Covered Termination pursuant to Section 2(b), within forty (40) days of the date
of the Change in Control of the Company, the Executive and the Company, at the
Company’s expense, shall obtain the opinion (which need not be unqualified) of
nationally recognized tax counsel (“National Tax Counsel”) selected by the
Company’s independent auditors and acceptable to the Executive in his sole
discretion (which may be regular outside counsel to the Company), which opinion
sets forth (1) the amount of the Base Period Income, (2) the amount and present
value of Total Payments and (3) the amount and present value of any excess
parachute payments.  The term “Base Period Income” means an amount
equal to the Executive’s “annualized includible compensation for the base
period” as defined in Section 280G(d)(1) of the Code (or any successor
provision).  For purposes of such opinion, the value of any noncash
benefits or any deferred payment or benefit shall be determined by the Company’s
independent auditors in accordance with the principles of Section 280G(d)(3) and
(4) of the Code (or any successor provisions), which determination shall be
evidenced in a certificate of such auditors addressed to the 

     

    
      
        
        

      

      
        -24-

        
          

        

      

      
        
        

      

    

     

    Company and the
Executive.  The opinion of National Tax Counsel shall be dated as of
the Termination Date and addressed to the Company and the Executive and shall be
binding upon the Company and the Executive.  If such National Tax
Counsel so requests in connection with the opinion required by this Subsection
9(b)(ii), the Executive and the Company shall obtain, at the Company’s expense,
and the National Tax Counsel may rely on in
providing the opinion, the advice of a firm of recognized executive compensation
consultants as to the reasonableness of any item of compensation to be received
by the Executive.  The Company shall pay (or cause to be paid) or
distribute (or cause to distribute) to or for the benefit of Executive the
amount of any Gross-Up Payment provided under this Subsection 9(b)(ii); such
payment or distribution shall be made on the last business day of the seventh
month following the month in which occurs the Executive’s Separation from
Service (or, in case the Executive is deemed to have a Covered Termination
pursuant to Section 2(b), as soon as practicable but in no event more than two
and one-half (2 1/2 ) months following the scheduled payment date).

     

    (C)           In
the event that upon any audit by the Internal Revenue Service, or by a state or
local taxing authority, of the Total Payments or Gross-Up Payment, a change is
finally determined to be required in the amount of Excise Tax paid by Executive,
appropriate adjustments shall be made under this Agreement such that the net
amount which is payable to the Executive after taking into account the
provisions of Section 4999 of the Code shall reflect the intent of the parties
as expressed in this Subsection 9(b)(ii), in the manner determined by the
National Tax Counsel.  If the Executive is determined to owe
additional Excise Tax, the Company shall reimburse the Executive for the
additional Excise Tax and any interest charges or penalties incurred by the
Executive in respect of 

     

    
      
        
        

      

      
        -25-

        
          

        

      

      
        
        

      

    

     

    the imposition of
such additional Excise Tax, and for any federal, state or local income tax or
employment tax or further Excise Tax incurred by Executive with respect to any
reimbursement under this provision.  Such reimbursement shall be made
as soon as practicable after the date on which the Executive pays the tax and
provides notice to the Company of the
payment of tax, but no later than the end of the Executive’s taxable year
following the taxable year in which the taxes are remitted.

     

    (D)           If
legislation is enacted or if regulations or rulings are promulgated that would
require the Company’s shareholders to approve this Agreement, prior to a Change
in Control of the Company, due solely to the provision contained in this
Subsection 9(b)(ii), then

     

    (1)           from
and after such time as shareholder approval would be required, until shareholder
approval is obtained as required by such legislation, Subsection 9(b)(ii) shall
be of no force and effect;

     

    (2)           the
Company and the Executive shall use their best efforts to consider and agree in
writing upon an amendment to this Subsection 9(b)(ii) such that, as amended,
this Subsection 9(b)(ii) would provide the Executive with the benefits intended
to be afforded to the Executive by Subsection 9(b)(ii) without requiring
shareholder approval; and

     

    (3)           at
the reasonable request of the Executive, the Company shall seek shareholder
approval of this Agreement at the next annual meeting of shareholders of the
Company.

     

    
      
        
        

      

      
        -26-

        
          

        

      

      
        
        

      

    

     

     

    10.           Death.  (a)  Except
as provided in Section 10(b) hereof, in the event of a Covered Termination due
to the Executive’s death, the Executive’s estate, heirs and beneficiaries shall
receive all the Executive’s Accrued Benefits through the Termination
Date.

     

    (b)           In
the event the Executive dies after a Notice of Termination is given (i) by
the Company or (ii) by the Executive for Good Reason, the Executive’s estate,
heirs and beneficiaries shall be entitled to the benefits described in Section
10(a) hereof and, subject to the 

    provisions of this
Agreement, to such Termination Payment as the Executive would have been entitled
to had the Executive lived; provided that the distribution will be made as soon
as practicable (and within 90 days following) the Executive’s death and the
requirement that payment be deferred until the last business day of the seventh
month following the month in which occurs the Executive’s Separation from
Service will not apply.  For purposes of this Subsection 10(b), the
Termination Date shall be the earlier of thirty days following the giving of the
Notice of Termination, subject to extension pursuant to Section 1(o) hereof, or
one day prior to the end of the Employment Period.

     

    11.           Retirement.  If,
during the Employment Period, the Executive and the Company shall execute an
agreement providing for the early retirement of the Executive from the Company,
or the Executive shall otherwise give notice that he is voluntarily choosing to
retire early from the Company, the Executive shall receive Accrued Benefits
through the Termination Date; provided, that if the
Executive’s employment is terminated by the Executive for Good Reason or by the
Company other than by reason of death, disability or Cause and the Executive
also, in connection with such termination, elects voluntary early retirement,
the Executive shall also be entitled to receive a Termination Payment pursuant
to Section 8(a) hereof.

     

    
      
        
        

      

      
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    12.           Termination for
Disability.  If,
during the Employment Period, as a result of the Executive’s disability due to
physical or mental illness or injury (regardless of whether such illness or
injury is job-related), the Executive shall have been absent from the
Executive’s duties hereunder on a full-time basis for a period of six
consecutive months and, within thirty days after the Company notifies the
Executive in writing that it intends to terminate the Executive’s employment
(which notice shall not constitute the Notice of Termination contemplated
below), the Executive shall not have returned to the performance of the
Executive’s duties hereunder on a full-time basis,
the Company may terminate the Executive’s employment for purposes of this
Agreement pursuant to a Notice of Termination given in accordance with Section
13 hereof.  If the Executive’s employment is terminated on account of
the Executive’s disability in accordance with this Section, the Executive shall
receive Accrued Benefits in accordance with Section 9(a) hereof and shall remain
eligible for all benefits provided by any long term disability programs of the
Company in effect at the time of such termination.

     

    13.           Termination Notice and
Procedure.  Any
Covered Termination by the Company or the Executive (other than a termination of
the Executive’s employment that is a Covered Termination by virtue of Section
2(b) hereof) shall be communicated by written Notice of Termination to the
Executive, if such Notice is given by the Company, and to the Company, if such
Notice is given by the Executive, all in accordance with the following
procedures and those set forth in Section 23 hereof:

     

    (a)           If
such termination is for disability, Cause or Good Reason, the Notice of
Termination shall indicate in reasonable detail the facts and circumstances
alleged to provide a basis for such termination.

     

    
      
        
        

      

      
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    (b)           Any
Notice of Termination by the Company shall have been approved, prior to the
giving thereof to the Executive, by a resolution duly adopted by a majority of
the directors of the Company (or any successor corporation) then in
office.

     

    (c)           If
the Notice is given by the Executive for Good Reason, the Executive may cease
performing his duties hereunder on or after the date fifteen days after the
delivery of Notice of Termination and shall in any event cease employment on the
Termination Date.  If the Notice is given by the Company, then the
Executive may cease performing his duties hereunder on the date of receipt of
the Notice of Termination, subject to the Executive’s rights
hereunder.

     

    (d)           The
Executive shall have thirty days, or such longer period as the Company may
determine to be appropriate, to cure any conduct or act, if curable, alleged to
provide grounds for termination of the Executive’s employment for Cause under
this Agreement pursuant to Subsection 1(d) (iii) hereof.

     

    (e)           The
recipient of any Notice of Termination shall personally deliver or mail in
accordance with Section 23 hereof written notice of any dispute relating to such
Notice of Termination to the party giving such Notice within fifteen days after
receipt thereof; provided, however, that if the Executive’s conduct or act
alleged to provide grounds for termination by the Company for Cause is curable,
then such period shall be thirty days.  After the expiration of such
period, the contents of the Notice of Termination shall become final and not
subject to dispute.

     

    14.           Further Obligations of the
Executive.

     

    (a)           Competition.  The
Executive agrees that, in the event of any Covered Termination where the
Executive is entitled to Accrued Benefits and the Termination Payment, the
Executive shall not, for a period expiring one year after the Termination Date,
without the prior written approval of the Company’s Board of Directors,
participate in the management of, 

     

    
      
        
        

      

      
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    be employed by or
own any business enterprise at a location within the United States that engages
in substantial competition with the Company or its subsidiaries, where the
operating revenues of the Company from activities in competition with such
entity amount to 10% or more of the total operating net revenues of the Company
for its most recently completed fiscal year; provided, however, that nothing in
this Section 14(a) shall prohibit the Executive from owning stock or other
securities of a competitor amounting to less than five percent of the
outstanding capital stock of such competitor.

     

              (b)           Confidentiality.  During
and following the Executive’s employment by the Company, the Executive shall
hold in confidence and not directly or indirectly disclose or use or copy or
make lists of any confidential information or proprietary data of the Company
(including that of the Employer), except to the extent authorized in writing by
the Board of Directors of the Company or required by any court or administrative
agency, other than to an employee of the Company or a person to whom disclosure
is reasonably necessary or appropriate in connection with the performance by the
Executive of duties as an executive of the Company.  Confidential
information shall not include any information known generally to the public or
any information of a type not otherwise considered confidential by persons
engaged in the same business or a business similar to that of the
Company.  All records, files, documents and materials, or copies
thereof, relating to the business of the Company which the Executive shall
prepare, or use, or come into contact with, shall be and remain the sole
property of the Company and shall be promptly returned to the Company upon
termination of employment with the Company.

     

    15.           Expenses and
Interest.  If,
after a Change in Control of the Company, (i) a dispute arises with respect to
the enforcement of the Executive’s rights under this Agreement or (ii) any legal
or arbitration proceeding shall be brought to enforce or interpret any provision

     

    
      
        
        

      

      
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    contained herein or
to recover damages for breach hereof, in either case so long as the Executive is
not acting in bad faith, the Executive shall recover from the Company any
reasonable attorneys’ fees and necessary costs and disbursements incurred as a
result of such dispute, legal or arbitration proceeding (“Expenses”), and
prejudgment interest on any money judgment or arbitration award obtained by the
Executive calculated at the rate of interest announced by US Bank Milwaukee,
National Association, Milwaukee, Wisconsin, from time to time as its prime or
base lending rate from the date that payments to him should have been made under
this Agreement.  Within ten days after the
Executive’s written request therefore (but in no event later than the end of the
calendar year following the calendar year in which such Expense is incurred),
the Company shall reimburse the Executive, or such other person or entity as the
Executive may designate in writing to the Company, the Executive’s reasonable
Expenses.

     

    16.           Payment Obligations
Absolute.  The
Company’s obligation during and after the Employment Period to pay the Executive
the amounts and to make the benefit and other arrangements provided herein shall
be absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any setoff, counterclaim, recoupment, defense or
other right which the Company may have against him or anyone
else.  Except as provided in Section 15 of this Agreement, all amounts
payable by the Company hereunder shall be paid without notice or
demand.  Each and every payment made hereunder by the Company shall be
final, and the Company will not seek to recover all or any part of such payment
from the Executive, or from whomsoever may be entitled thereto, for any reason
whatsoever.

     

    17.           Successors.  (a)  If
the Company sells, assigns or transfers all or substantially all of its business
and assets to any Person or if the Company merges into or consolidates or
otherwise combines (where the Company does not survive such combination)

     

    
      
        
        

      

      
        -31-

        
          

        

      

      
        
        

      

    

     

    with any Person
(any such event, a “Sale of Business”), then the Company shall assign all of its
right, title and interest in this Agreement as of the date of such event to such
Person, and the Company shall cause such Person, by written agreement in form
and substance reasonably satisfactory to the Executive, to expressly assume and
agree to perform from and after the date of such assignment all of the terms,
conditions and provisions imposed by this Agreement upon the
Company.  Failure of the Company to obtain such agreement prior to the
effective date of such Sale of Business shall be a breach of this Agreement
constituting “Good Reason” hereunder, except that for purposes of implementing the
foregoing the date upon which such Sale of Business becomes effective shall be
deemed the Termination Date.  In case of such assignment by the
Company and of assumption and agreement by such Person, as used in this
Agreement, “Company” shall thereafter mean such Person which executes and
delivers the agreement provided for in this Section 17 or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law, and this Agreement shall inure to the benefit of, and be enforceable by,
such Person.  The Executive shall, in his discretion, be entitled to
proceed against any or all of such Persons, any Person which theretofore was
such a successor to the Company (as defined in the first paragraph of this
Agreement) and the Company (as so defined) in any action to enforce any rights
of the Executive hereunder.  Except as provided in this Subsection,
this Agreement shall not be assignable by the Company.  This Agreement
shall not be terminated by the voluntary or involuntary dissolution of the
Company.

     

    (b)           This
Agreement and all rights of the Executive shall inure to the benefit of and be
enforceable by the Executive’s personal or legal representatives, executors,
administrators, heirs and beneficiaries.  All amounts payable to the
Executive under Sections 7, 8, 9, 10, 11, 12 and 15 hereof if the Executive had
lived shall be paid, in the event of the 

     

    
      
        
        

      

      
        -32-

        
          

        

      

      
        
        

      

    

     

    Executive’s death,
to the Executive’s estate, heirs and representatives; provided, however, that
the foregoing shall not be construed to modify any terms of any benefit plan of
the Company, as such terms are in effect on the date of the Change in Control of
the Company, that expressly govern benefits under such plan in the event of the
Executive’s death.

     

    18.           Severability.  The
provisions of this Agreement shall be regarded as divisible, and if any of said
provisions or any part hereof are declared invalid or unenforceable by a court
of competent
jurisdiction, the validity and enforceability of the remainder of such
provisions or parts hereof and the applicability thereof shall not be affected
thereby.

     

    19.           Amendment.  This
Agreement may not be amended or modified at any time except by written
instrument executed by the Company and the Executive.

     

    20.           Withholding.  The
Company shall be entitled to withhold from amounts to be paid to the Executive
hereunder any federal, state or local withholding or other taxes or charges
which it is from time to time required to withhold; provided, that the amount so
withheld shall not exceed the minimum amount required to be withheld by
law.  In addition, if prior to the date of payment of the Termination
Payment hereunder, the Federal Insurance Contributions Act (FICA) tax imposed
under Sections 3101, 3121(a) and 3121(v)(2), where applicable, becomes due, the
Company may provide for an immediate payment of the amount needed to pay the
Executive’s portion of such tax (plus an amount equal to the taxes that will be
due on such amount) and the Executive’s Termination Payment shall be reduced
accordingly.  The Company shall be entitled to rely on an opinion of
nationally recognized tax counsel if any question as to the amount or
requirement of any such withholding shall arise.

     

    21.           Certain Rules of
Construction.  No
party shall be considered as being responsible for the drafting of this
Agreement for the purpose of applying any rule construing 

     

    
      
        
        

      

      
        -33-

        
          

        

      

      
        
        

      

    

     

    ambiguities against
the drafter or otherwise.  No draft of this Agreement shall be taken
into account in construing this Agreement.  Any provision of this
Agreement which requires an agreement in writing shall be deemed to require that
the writing in question be signed by the Executive and an authorized
representative of the Company.

     

    22.           Governing Law; Resolution of
Disputes.  This
Agreement and the rights and obligations hereunder shall be governed by and
construed in accordance with the laws of the State of
Wisconsin.  Any dispute arising out of this Agreement shall, at the
Executive’s election, be determined by arbitration under the rules of the
American Arbitration Association then in effect (in which case both parties
shall be bound by the arbitration award) or by litigation.  Whether
the dispute is to be settled by arbitration or litigation, the venue for the
arbitration or litigation shall be Green Bay, Wisconsin or, at the Executive’s
election, if the Executive is not residing or working in the Green Bay,
Wisconsin metropolitan area, in the judicial district encompassing the city in
which the Executive resides; provided, that, if the
Executive is not then residing in the United States, the election of the
Executive with respect to such venue shall be either Green Bay, Wisconsin or in
the judicial district encompassing that city in the United States among the
thirty cities having the largest population (as determined by the most recent
United States Census data available at the Termination Date) which is closest to
the Executive’s residence.  The parties consent to personal
jurisdiction in each trial court in the selected venue having subject matter
jurisdiction notwithstanding their residence or situs, and each party
irrevocably consents to service of process in the manner provided hereunder for
the giving of notices.

     

    23.           Notice.  Notices
given pursuant to this Agreement shall be in writing and, except as otherwise
provided by Section 13(d) hereof, shall be deemed given when actually

     

    
      
        
        

      

      
        -34-

        
          

        

      

      
        
        

      

    

     

    received by the
Executive or actually received by the Company’s Secretary or any officer of the
Company other than the Executive.  If mailed, such notices shall be
mailed by United States registered or certified mail, return receipt requested,
addressee only, postage prepaid, if to the Company, to Integrys Energy Group,
Inc., Attention: Secretary (or President, if the Executive is the Secretary),
700 North Adams Street, P.O. Box 19001, Green Bay, Wisconsin 54307, or if to the
Executive, at the
address set forth below the Executive’s signature to this Agreement, or to such
other address as the party to be notified shall have theretofore given to the
other party in writing.

     

    24.           No Waiver.  No
waiver by either party at any time of any breach by the other party of, or
compliance with, any condition or provision of this Agreement to be performed by
the other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same time or any prior or subsequent time.

     

    25.           Headings.  The
headings herein contained are for reference only and shall not affect the
meaning or interpretation of any provision of this Agreement.

     

    26.           Code Section 409A
Compliance.  The
Company and the Executive agree that to the extent Code Section 409A applies to
this Agreement, the Agreement shall be interpreted and administered in
accordance with the requirements of Code Section 409A so that there will not be
a plan failure under Code Section 409A(a)(1), and all amounts payable hereunder
shall be distributed only in compliance with the requirements of Code Section
409A, including by way of example and without limitation, Code Section
409A(2)(A)(i), which prohibits the distribution of certain compensation subject
to Code Section 409A to a “specified employee” of a publicly traded company, in
the case of a distribution that occurs by reason of the employee’s separation of
service other than death, from occurring any earlier than six months

     

    
      
        
        

      

      
        -35-

        
          

        

      

      
        
        

      

    

     

    after the date of
such separation of service.  The Executive acknowledges that to avoid
an additional tax on payments that may be payable or benefits that may be
provided under this Agreement and that constitute deferred compensation that is
not exempt from Section 409A of the Code, the Executive must make a reasonable,
good faith effort to collect any payment or benefit to which the Executive
believes the Executive is entitled hereunder no later than 90 days after the
latest date upon which the payment could have been made or benefit provided
under this Agreement, and if not paid or provided, must take further enforcement
measures within 180 days after such latest date.

     

    IN WITNESS WHEREOF,
the parties have executed this Agreement as of the day and year first above
written.

     

    INTEGRYS
ENERGY GROUP, INC.

     

    By:                                                                           

     

    Title:                                                                         

     

     

    Attest:                                                                         

     

    Title:                                                                         

     

    

    EXECUTIVE:

     

    By:                                                                           

     

    Title:                                                                         

     

    EXECUTIVE
ADDRESS:

     

    ________________________________________

     

    ________________________________________

     

     

     

    

    
      
        
           

        

        
          -36-

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