Document:

EXHIBIT 10.02 AMENDMENT TO CREDIT AGREEMENT - 10-27-2006

    Nicor
      Gas

    Form
      10-Q

    Exhibit
      10.02

    
 

    EXECUTION
      VERSION

     

    SECOND
      AMENDMENT TO THE 5-YEAR CREDIT AGREEMENT

     

    This
      amendment (the "Amendment"),
      dated
      as of October 26, 2006, is entered into by and among
      NORTHERN
      ILLINOIS GAS COMPANY and
      NICOR
      INC. (each, a "Borrower"
      and
      collectively, the "Borrowers"),
      JPMORGAN CHASE BANK, N.A., in its capacity as administrative agent (in such
      capacity, the "Administrative
      Agent"),
      and
      certain of the lenders constituting the Required Lenders (as defined in the
      5-Year Credit Agreement, defined below).

     

    The
      Borrowers, the Administrative Agent and, among others, the financial
      institutions party thereto (the "Lenders"),
      are
      parties to the 5 year credit agreement dated as of September 13, 2005 (as
      modified and supplemented and in effect from time to time, the "5-Year
      Credit Agreement"),
      providing, subject to the terms and conditions thereof, several commitments
      of
      the Lenders to make available a revolving letter of credit facility for loans
      to
      the Borrowers in an aggregate principal or face amount of
      $600,000,000.

     

    The
      Borrowers, the Administrative Agent and the Lenders party to the 5-Year Credit
      Agreement constituting the Required Lenders, wish now to amend the 5-Year Credit
      Agreement in certain respects, and accordingly, the parties hereto hereby agree
      as follows:

     

    Section
      1.  Definitions.
      Except
      as otherwise defined in this Amendment, terms defined in the 5-Year Credit
      Agreement are used herein (and in the introductions and recitals hereto) as
      defined therein.

     

    Section
      2.  Amendments.
      Subject
      to the satisfaction of the conditions precedent specified in Section
      4
      below,
      but effective as of the date hereof, the 5-Year Credit Agreement shall be
      amended as follows:

     

    2.01.
      References
      Generally.
      References in the 5-Year Credit Agreement (including references to the 5-Year
      Credit Agreement as amended hereby) to "this Agreement" (and indirect references
      such as "hereunder," "hereby," "herein" and "hereof") shall be deemed to be
      references to the 5-Year Credit Agreement as amended hereby. 

     

    2.02.
      Definitions.
      Section
      1.1
      of the
      5-Year Credit Agreement shall be amended by amending and restating in their
      entirety the following definitions: 

     

    "“Applicable
      Repayment Date”
means,
      with respect to each Loan made hereunder, the earlier of (i) the date occurring
      one day prior to the date which is one year from the date the initial Borrowing
      of such Loan was advanced, and (ii) the Termination Date. "

     

    "“Impermissible
      Qualification”
means,
      relative to the opinion or certification of any independent public accountant
      as
      to any financial statement of a Borrower, any qualification or exception to
      such
      opinion or certification (i) which is of a “going concern” or similar nature,
      (ii) which relates to the limited scope of examination of matters relevant
      to
      such financial statement, or (iii) which relates to the treatment or
      classification of any item in such financial statement and which would require
      an adjustment to such item the effect of which would be to cause the Borrowers
      to be in violation of Section 7.15 hereof."

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    "“Indebtedness”
means,
      as to any Person, without duplication: (i) all obligations of such Person for
      borrowed money or evidenced by bonds, debentures, notes or similar instruments;
      (ii) all obligations of such Person for the deferred purchase price of Property
      or services (other than in respect of trade accounts payable arising in the
      ordinary course of business which are not past-due); (iii) all Capitalized
      Lease
      Obligations of such Person; (iv) all indebtedness of the kind referred to in
      (i)-(iii) and (v)-(vii) secured by a Lien on such Person's interest in Property,
      assets or revenues to the extent of the lesser of the value of such Person's
      interest in such Property that is subject to such Lien or the principal amount
      of such indebtedness but excluding any such indebtedness secured by a Lien
      on
      any Property or assets owned by others if (A) such Person holds only a leasehold
      interest or an easement, right-of-way, license or similar right of use or
      occupancy with respect to such Property or asset and (B) such Person has not
      assumed or become liable for the payment of such indebtedness; (v) all
      Guarantees issued by such Person of Indebtedness of another Person; (vi) all
      obligations of such Person, contingent or otherwise, in respect of any letters
      of credit (whether commercial or standby) or bankers’ acceptances, and (vii) all
      obligations of such Person under synthetic (and similar type) lease
      arrangements; provided
      that for
      purposes of calculating such Person’s Indebtedness under such synthetic (or
      similar type) lease arrangements, such lease arrangement shall be treated as
      if
      it were a Capitalized Lease."

     

    "“Property”
means
      any property or asset, of any nature whatsoever, whether real, personal or
      mixed, tangible or intangible, and whether now owned or hereafter
      acquired."

     

    "“Related
      Parties”
means,
      subject to the provisions of Section 11.8 with respect to any Person, such
      Person’s Affiliates and the directors, officers, employees, agents and advisors
      of such Person and of such Person’s Affiliates."

     

    "“SEC
      Disclosure Documents”
means
      all reports on forms 10K, 10Q, and 8K filed by Nicor or Nicor Gas with the
      SEC
      prior to the Closing Date."

     

    Section
      1.1
      of the
      5-Year Credit Agreement shall be further amended by adding the following
      definitions: 

     

    "“Guaranty”
means
      the Guaranty dated as of December 22, 2005, as amended or supplemented from
      time
      to time, among Nicor, as guarantor, in favor of JPMorgan Chase Bank, N.A.,
      in
      its capacity as agent for the lenders to the 2 Year Term Loan
      Agreement."

     

    "“ICC
      Permitted Investment”
means
      any investment permitted by subsection (a) of Section 340.50 of the rules of
      the
      Illinois Commerce Commission."

     

    "“ICC
      Regulated Transaction”
means
      any transaction between Nicor Gas and Nicor or any wholly-owned subsidiary
      of
      Nicor that does not violate the applicable orders, rules and regulations of
      the
      Illinois Commerce Commission."

     

    "“2
      Year Term Loan Agreement”
means
      the 2 Year Term Loan Agreement dated as of December 22, 2005, as amended or
      supplemented from time to time, by and among Tropical Shipping and Construction
      Company Limited, a Cayman Islands exempt company, as borrower, the financial
      institutions from time to time party thereto, and JPMorgan Chase Bank, N.A.,
      as
      administrative agent."

     

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    "“210-Day
      Facility Agreement”
means
      (i) the 210-Day Credit Agreement entered into October 26, 2006, as amended
      or
      supplemented from time to time, among Nicor Gas, the financial institutions
      party thereto, JPMorgan Chase Bank, N.A., as administrative agent, ABN AMRO
      Bank
      NV, as syndication agent, Wachovia Bank, N.A., The Bank of Tokyo-Mitsubishi
      UFJ,
      Ltd., Chicago Branch and The Bank of New York, as documentation agents, J.P.
      Morgan Securities Inc. and ABN AMRO Incorporated, as joint lead-arrangers and
      bookrunners and (ii) any successive agreements to the 210-Day Credit Agreement
      referred to in clause (i) above which are on substantially similar terms and
      are
      for substantially similar purposes as the credit agreement referred to in clause
      (i)."

     

    2.03.
      Extensions.
      Section
      3.2
      of the
      5-Year Credit Agreement shall be amended and restated in its entirety to read
      as
      follows: 

     

    "Section
      3.2 Extensions.
      

     

    (a) Requests
      for Extension.
      The
      Borrowers may, by notice to the Administrative Agent (which shall promptly
      notify the Lenders) not earlier than 45 days and not later than 35 days prior
      to
      each anniversary of the Closing Date (the “Annual
      Anniversary”),
      request that each Lender extend such Lender’s Termination Date for an additional
      year from the Termination Date then in effect hereunder (the “Existing
      Termination Date”).

     

    (b) Lender
      Elections to Extend.
      Each
      Lender, acting in its sole and individual discretion, shall, by notice to the
      Administrative Agent given not earlier than 30 days prior to the Annual
      Anniversary and not later than the date (the “Notice
      Date”)
      that
      is 20 days prior to the Annual Anniversary, advise the Administrative Agent
      whether or not such Lender agrees to such extension and each Lender that
      determines not to so extend its Commitment Termination Date (a “Non-Extending
      Lender”)
      shall
      notify the Administrative Agent of such fact promptly after such determination
      (but in any event no later than the Notice Date) and any Lender that does not
      so
      advise the Administrative Agent on or before the Notice Date shall be deemed
      to
      be a Non-Extending Lender. The election of any Lender to agree to such extension
      shall not obligate any other Lender to so agree.

     

    (c) Notification
      by Administrative Agent.
      The
      Administrative Agent shall notify the Borrowers of each Lender’s determination
      under this Section no later than the date 15 days prior to the Annual
      Anniversary (or, if such date is not a Business Day, on the next preceding
      Business Day).

     

    (d) Additional
      Commitment Lenders.
      The
      Borrowers shall have the right on or before the Annual Anniversary to replace
      each Non-Extending Lender with, and add as “Lenders” under this Agreement in
      place thereof, one or more Eligible Assignees (each, an “Additional
      Commitment Lender”)
      with
      the approval of the Administrative Agent (which approval shall not be
      unreasonably withheld). Each Additional Commitment Lender shall enter into
      an
      agreement in form and substance satisfactory to the Borrowers and the
      Administrative Agent pursuant to which such Additional Commitment Lender shall,
      effective as of the Existing Termination Date, undertake a Commitment (and,
      if
      any such Additional Commitment Lender is already a Lender, its Commitment shall
      be in addition to such Lender’s Commitment hereunder on such date).

     

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    (e) Minimum
      Extension Requirement.
      If (and
      only if) the Required Lenders have agreed to extend their Termination Date,
      then, effective as of the Annual Anniversary, the Termination Date of each
      Extending Lender and of each Additional Commitment Lender shall be extended
      to
      the date falling one year after the Existing Termination Date (except that,
      if
      such date is not a Business Day, such Commitment Date as so extended shall
      be
      the next preceding Business Day) and each Additional Commitment Lender shall
      thereupon become a “Lender” for all purposes of this Agreement.

     

    (f) Conditions
      to Effectiveness of Extensions.
      Notwithstanding the foregoing, the extension of the Termination Date pursuant
      to
      this Section shall not be effective with respect to any Lender
      unless:

     

    (i) no
      Default or Event of Default shall have occurred and be continuing on the date
      of
      such extension and after giving effect thereto;

     

    (ii) the
      representations and warranties contained in this Agreement are true and correct
      on and as of the date of such extension and after giving effect thereto, as
      though made on and as of such date (or, if any such representation or warranty
      is expressly stated to have been made as of a specific date, as of such specific
      date); 

     

    (iii)
       the
      Borrowers shall deliver a certified copy of their respective Board of Directors'
      resolutions authorizing such extension; and

     

    (iv) on
      or
      before the Termination Date of each Non-Extending Lender, (1) the Borrowers
      shall have paid in full the principal of and interest on all of the Loans made
      by such Non-Extending Lender to the Borrowers hereunder and (2) the Borrowers
      shall have paid in full all other Obligations owing to such Lender
      hereunder."

     

    2.04
      Representations
      and Warranties.
      The
      lead-in to Section
      5
      of the
      5-Year Credit Agreement is hereby amended and restated in its entirety to read
      as follows: 

     

    "Section
      5 
      Each
      Borrower hereby represents and warrants to each Lender as to itself and, where
      the following representations and warranties apply to its Subsidiaries or
      Material Subsidiaries, as to each Subsidiary or Material Subsidiary, as
      applicable, of such Borrower, as follows:"

     

    2.05.
      Government
      Regulation.
      Section
      5.9
      of the
      5-Year Credit Agreement is hereby amended and restated in its entirety to read
      as follows: 

     

    "Section
      5.9 
Government
      Regulation. Neither
      Borrower nor any Subsidiary of a Borrower is an “investment
      company”
within
      the meaning of the Investment Company Act of 1940, as amended."

     

    2.06.
      Property
      and Liens.
      Section
      5.12
      of the
      5-Year Credit Agreement is hereby amended and restated in its entirety to read
      as follows: 

     

    "Section
      5.12 
Ownership
      of Property; Liens.
      Each
      Borrower and each Subsidiary of such Borrower owns good title to, or a valid
      leasehold interest in, or other enforceable

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    interest
      in, its Property to the extent owned or leased by it (except where the failure
      to have such title, a valid leasehold interest or other enforceable interest
      is
      not reasonably likely to have a Material Adverse Effect) free and clear of
      all
      Liens, except as permitted in Section 7.9."

     

    2.07.
      Compliance
      with Agreements.
      Section
      5.13
      of the
      5-Year Credit Agreement is hereby amended and restated in its entirety to read
      as follows: 

     

    "Section
      5.13 
Compliance
      with Agreements. None
      of
      the execution and delivery of this Agreement and the Notes, the consummation
      of
      the transactions herein contemplated and compliance with the terms and
      provisions hereof will conflict with or result in a breach of, or require any
      consent under, the charter or by-laws of either of the Borrowers, or any
      applicable law or regulation, or any order, writ, injunction or decree of any
      court or Governmental Authority, or any Contractual Obligation to which either
      Borrower is a party or by which it is bound or to which it is subject, or
      constitute a default under any such Contractual Obligation, or result in the
      creation or imposition of any Lien upon any of the revenues or assets of either
      of the Borrowers pursuant to the terms of any such Contractual Obligation except
      as would not have a Material Adverse Effect."

     

    2.08.
      ERISA.
      Section
      7.4
      of the
      5-Year Credit Agreement is hereby amended and restated in its entirety to read
      as follows: 

     

    "Section
      7.4 
ERISA.
      Each
      Borrower will, and will cause each of its Subsidiaries to, promptly pay and
      discharge all obligations and liabilities arising under ERISA of a character
      which if unpaid or unperformed is reasonably likely to result in the imposition
      of a Lien against any of its Properties, except to the extent the imposition
      of
      such Lien would not result in a Material Adverse Effect."

     

    2.09.
      Financial
      Reports and Other Information.
      Section
      7.6(b)
      and
Section
      7.6(d)
      of the
      5-Year Credit Agreement are here by amended and restated in its entirety to
      read
      as follows: 

     

    "Section
      7.6(b). 

     

    ....

     

    (b) Each
      financial statement furnished to the Lenders pursuant to subsection (a) of
      this
      Section 7.6 shall be accompanied by a Compliance Certificate in the form of
      Exhibit B hereto signed by the Chief Financial Officer, Vice President -
      Controller, or Vice President - Treasurer of Nicor. Information required to
      be
      delivered pursuant to subsections (a), (d) and (e) of this Section 7.6 shall
      be
      deemed to have been delivered on the date on which a Borrower provides notice
      to
      the Administrative Agent (via email or otherwise) that such information has
      been
      posted on Nicor's website on the Internet at www.nicor.com, at
      www.sec.gov/edgar/searchedgar/webusers.htm or at another website identified
      in
      such notice and accessible by the Lenders without charge, provided
      that (i)
      such notice may be included in a Compliance Certificate in the form of Exhibit
      B
      and (ii) a Borrower shall deliver paper copies of the information required
      to be
      delivered pursuant to subsections (a), (d) and (e) of this Section 7.6 to any
      Lender that requests such delivery."

     

    "Section
      7.6(d). 

     

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    ....

     

    (d) Promptly
      upon their becoming available, and without duplication of the other materials
      required to be delivered pursuant to this Agreement, each Borrower will deliver
      (via email or otherwise) to the Administrative Agent, with copies for each
      Lender copies of all registration statements and regular periodic reports,
      if
      any, which either Borrower shall have filed with the SEC (or any governmental
      agency substituted therefore) or any national securities exchange."

     

    2.10.
      Lender
      Inspection Rights.
      Section
      7.7
      of the
      5-Year Credit Agreement shall be amended and restated in its entirety to read
      as
      follows: 

     

    "Section
      7.7. Lender
      Inspection Rights. For
      purposes of confirming compliance with the Credit Documents or after the
      occurrence and during the continuance of an Event of Default, upon reasonable
      notice from the Administrative Agent or the Required Lenders, Borrowers will,
      permit the Lenders (and such Persons as any Lender may designate) during normal
      business hours to visit and inspect, under Borrowers’ guidance, any of the
      Properties of Borrowers or any of their Material Subsidiaries, to examine all
      of
      their books of account, records, reports and other papers, to make copies and
      extracts therefrom, and to discuss their respective affairs, finances and
      accounts with their respective officers, employees and with their independent
      public accountants (and by this provision Borrowers authorize such accountants
      to discuss with the Lenders (and such Persons as any Lender may designate)
      the
      finances and affairs of Borrowers and their Material Subsidiaries) all at such
      reasonable times and as often as may be reasonably requested; provided, however,
      that except upon the occurrence and during the continuation of any Default
      or
      Event of Default, not more than one such visit and inspection may be conducted
      in any twelve month period. Prior to the occurrence of an Event of Default,
      the
      Borrowers shall only be required to pay the costs and expenses of professionals
      retained by the Administrative Agent in connection with any such visit or
      inspection. After the occurrence of an Event of Default, the Borrowers shall
      be
      obligated to pay all reasonable costs and expenses incurred by the
      Administrative Agent and the Lenders in connection with such visitations and
      inspections. The Borrowers shall receive advance notice of any proposed
      discussion with such accountants and shall have the right to participate
      therein."

     

    2.11.
      Liens.
      Section
      7.9
      of the
      5-Year Credit Agreement shall be amended and restated in its entirety to read
      as
      follows: 

     

    "Section
      7.9 Liens.
      Neither
      Borrower will, nor will it permit any of its Material Subsidiaries to, create,
      incur, permit or suffer to exist any Lien on any of its Property, whether now
      owned or hereafter acquired by such Borrower or any Material Subsidiary of
      such
      Borrower; provided,
      however,
      that
      this Section 7.9 shall not apply to or operate to prevent:

     

    (a)  Liens
      arising by operation of law which are incurred in the ordinary course of
      business which do not in the aggregate materially detract from the value of
      the
      Property subject thereto or materially impair the use thereof in the operation
      of the business of Borrower or any of its Material Subsidiaries;

     

    (b)  Liens
      for
      taxes or assessments or other government charges or levies on a Borrower or
      any
      Material Subsidiary of a Borrower or their respective Properties which

     

                                                                     
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      are
        not
        past due or which are being contested in good faith by appropriate proceedings
        and for which reserves in conformity with GAAP have been provided on the
        books
        of a Borrower; provided
        that the
        aggregate amount of liabilities (including interest and penalties, if any)
        of
        the Borrowers and their Material Subsidiaries secured by such Liens shall
        not
        exceed $20,000,000 at any one time outstanding;

    

     

    (c)  Liens
      arising out of judgments or awards against a Borrower or any Material Subsidiary
      of a Borrower, or in connection with surety or appeal bonds in connection with
      bonding such judgments or awards, the time for appeal from which or petition
      for
      rehearing of which shall not have expired or with respect to which such Borrower
      or such Material Subsidiary shall be prosecuting an appeal or proceeding for
      review, and with respect to which it shall have obtained a stay of execution
      pending such appeal or proceeding for review; provided
      that the
      aggregate amount of liabilities (including interest and penalties, if any)
      of
      Borrower and its Material Subsidiaries secured by such Liens shall not exceed
      $20,000,000 at any one time outstanding;

     

    (d)  Survey
      exceptions or encumbrances, easements or reservations, or rights of others
      for
      rights-of-way, utilities and other similar purposes, or zoning or other
      restrictions as to the use of real Properties which do not materially impair
      their use in the operation of the business of a Borrower or any Material
      Subsidiary of a Borrower;

     

    (e)  Liens
      existing on the date hereof and Liens granted pursuant to the terms of the
      Nicor
      Gas Indenture;

     

    (f)  Liens
      securing Indebtedness and other obligations; provided that such Liens permitted
      by this paragraph (f) shall only be permitted to the extent the aggregate amount
      of Indebtedness and other obligations secured by all such Liens does not exceed
      ten percent (10%) of the difference between (A) Consolidated Assets as reflected
      on the most recent balance sheet delivered by Nicor pursuant to Section 7.6,
      minus (B) the amount of Indebtedness then outstanding under the Nicor Gas
      Indenture;

     

    (g)  Liens
      in
      favor of carriers, warehousemen, mechanics, materialmen and landlords granted
      in
      the ordinary course of business for amounts not overdue or being diligently
      contested in good faith by appropriate proceedings and for which adequate
      reserves in accordance with GAAP shall have been set aside on its
      books;

     

    (h)  Liens
      incurred or deposits made in the ordinary course of business in connection
      with
      worker’s compensation, unemployment insurance or other forms of governmental
      insurance or benefits;

     

    (i)  Liens
      with respect to any surplus assets leased by either Borrower or any of its
      Material Subsidiaries;

     

    (j)  Liens
      on
      any Properties or assets owned by a Person other than either Borrower or any
      Material Subsidiary of either Borrower if such Borrower or a Material Subsidiary
      of such Borrower holds only leasehold interests or easements, rights-of-way,
      licenses or similar rights of use or occupancy with respect to such Properties
      or assets;

     

    (k)  Any
      extension, renewal or replacement (or successive extensions, renewals or
      replacements) in whole or in part of any Lien referred to in the foregoing
      paragraphs (a) through (j), inclusive; provided,
      however,
      that
      the principal amount of 

     

                                                                    
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Indebtedness
        of either Borrower or any of its Material Subsidiaries secured thereby shall
        not
        exceed the principal amount of Indebtedness of such Borrower or any of its
        Material Subsidiaries so secured at the time of such extension, renewal or
        replacement, and that such extension, renewal or replacement shall be limited
        to
        the Property of either Borrower or any of its Material Subsidiaries which
        was
        subject to the Lien so extended, renewed or replaced; 

    

     

    provided,
      that,
      except as may be created under the Nicor Gas Indenture, the foregoing paragraphs
      shall not be deemed under any circumstance to permit a Lien to exist on (i)
      any
      capital stock or other equity interests of Nicor Gas or (ii) Nicor Gas’ natural
      gas inventory or any receivables arising from the sale of such
      inventory.

     

    Any
      Lien
      which when incurred or permitted to exist complies with the requirements of
      paragraphs (a) through (k) above may continue to exist, and shall be permitted
      hereunder, notwithstanding that such Lien if incurred thereafter would not
      comply with such requirement."

     

    2.12.
      Investments,
      Acquisitions, Loans, Advances and Guaranties.
      Section
      7.13
      of the
      5-Year Credit Agreement shall be amended and restated in its entirety to read
      as
      follows: 

     

    "Section
      7.13 Investments,
      Acquisitions, Loans, Advances and Guaranties. Neither
      Borrower will, nor will it permit any Material Subsidiary of such Borrower
      to,
      directly or indirectly, make, retain or have outstanding any investments
      (whether through purchase of stock or obligations or otherwise) in, or loans
      or
      advances to, any other Person, or acquire all or any substantial part of the
      assets or business of any other Person or division thereof, or be or become
      liable as endorser, guarantor, surety or otherwise (such as liability as a
      general partner) for any debt, obligation or undertaking of any other Person,
      or
      otherwise agree to provide funds for payment of the obligations of another,
      or
      supply funds thereto or invest therein or otherwise assure a creditor of another
      against loss, or apply for or become liable to the issuer of a letter of credit
      which supports an obligation of another, or subordinate any claim or demand
      it
      may have to the claim or demand of any other Person (cumulatively, all of the
      foregoing “Investments”); provided, however, that the foregoing provisions shall
      not apply to nor operate to prevent:

     

    (a) ICC
      Permitted Investments; 

     

    (b) ownership
      of stock, obligations or securities received in settlement of debts owing to
      a
      Borrower or any Subsidiary;

     

    (c) endorsements
      of negotiable instruments for collection in the ordinary course of
      business;

     

    (d) loans
      and
      advances to employees in the ordinary course of business for travel, relocation,
      and similar purposes;

     

    (e) Investments
      (i) in or with respect to either Borrower or any Subsidiary of either Borrower,
      including intercompany loans, or (ii) existing on the Closing Date;

     

    (f) Investments
      constituting (i) accounts receivable arising, (ii) trade debt granted, or (iii)
      deposits made in connection with the purchase price of goods or services, in
      each case in the ordinary course of business;

     

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    (g) Investments
      in Persons engaged in substantially the same lines of business as the Borrowers
      or any of their Subsidiaries so long as, unless consented to by the Required
      Lenders, (i) no downgrade in the S&P Rating or Moody’s Rating would occur as
      a result of the consummation of such Investment, (ii) if such Investment is
      for
      the purpose of acquiring another Person, the Board of Directors (or similar
      governing body) of such Person being acquired has approved being so acquired,
      and (iii) no Default or Event of Default has occurred and is continuing at
      the
      time of, or would occur as a result of, such Investment; and

     

    (h) Guarantees
      by either Borrower or any of their respective Subsidiaries of any Indebtedness
      (so long as such Indebtedness is permitted pursuant to Section 7.14) or other
      obligations of either Borrower or any of their respective
      Subsidiaries;

     

    (i) Investments,
      whether directly or indirectly through one or more Subsidiaries, in Triton
      Container Investments LLC, a cargo container leasing business, made after the
      Closing Date in an aggregate amount not to exceed $20,000,000 in any one year
      (with the Closing Date and each anniversary thereof being deemed the first
      day
      of a year for calculating compliance with this provision); and

     

    (j) other
      Investments in addition to those set forth above not to exceed an aggregate
      amount of (i) $50,000,000 in any one year (with the Closing Date and each
      anniversary thereof being deemed the first day of a year for calculating
      compliance with this provision), and (ii) $100,000,000 during the term of this
      Agreement.

     

    Any
      Investment which when made complies with the requirements of paragraphs (a)
      through (i) above may continue to be held notwithstanding that such Investment
      if made thereafter would not comply with such requirements.

     

    In
      determining the amount of investments, acquisitions, loans, advances and
      guarantees permitted under this Section 7.13, investments and acquisitions
      shall
      always be taken at the original cost thereof (regardless of any subsequent
      appreciation or depreciation therein), loans and advances shall be taken at
      the
      principal amount thereof then remaining unpaid, and guarantees shall be taken
      at
      the amount of obligations guaranteed thereby."

     

    2.13.
      Restrictions
      on Indebtedness.
      Section
      7.14
      of the
      5-Year Credit Agreement shall be amended and restated in its entirety to read
      as
      follows: 

     

    "Section
      7.14 Restrictions
      on Indebtedness. Neither
      Borrower will, nor will it permit any of its Material Subsidiaries to, issue,
      incur, assume, create, become liable for, contingently or otherwise, or have
      outstanding any Indebtedness, provided
      that the
      foregoing provisions shall not restrict nor operate to prevent the following
      Indebtedness:

     

    (a) the
      Obligations;

     

    (b) any
      other
      Indebtedness so long as after giving effect to the incurrence thereof the
      Borrowers shall be in compliance with the Leverage Ratio set forth in Section
      7.15."

     

    2.14.
      Leverage
      Ratio.
      Section
      7.15
      of the
      5-Year Credit Agreement shall be amended and restated in its entirety to read
      as
      follows: 

     

    9

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

    "Section
      7.15 Leverage
      Ratio. Nicor
      will not at the end of any fiscal quarter permit the ratio of its Consolidated
      Indebtedness to its Capital to exceed 0:70 to 1:00.

     

    For
      the
      purposes of the calculation of the ratio of Nicor's Consolidated Indebtedness
      to
      Nicor's Capital, (1) any non-cash effects resulting from adoption of the
      proposed “Statement of Financial Accounting Standards dated March 31, 2006:
      Employers’ Accounting for Defined Pension and other Postretirement Plans, an
      amendment of FASB Statements No. 87, 88, 106, and 132(R)" shall be excluded;
      (2)
      any hybrid equity securities, meaning any securities issued by Nicor and/or
      its
      Subsidiaries or a financing vehicle of Nicor and/or its Subsidiaries that (i)
      are classified as possessing a minimum of “intermediate equity content” by
      S&P, Basket C equity credit by Moody’s, and 50% equity credit by Fitch and
      (ii) require no repayments or prepayments and no mandatory redemptions or
      repurchases, in each case, prior to at least 91 days after the later of the
      termination of the Commitments and the repayment in full of the Loans and all
      other amounts due hereunder, shall be excluded from Nicor's Consolidated
      Indebtedness and (3) any mandatorily convertible securities, meaning any
      mandatorily convertible equity-linked securities issued by Nicor and/or its
      Subsidiaries, so long as the terms of such securities require no repayments
      or
      prepayments and no mandatory redemptions or repurchases, in each case prior
      to
      at least 91 days after the later of the termination of the Commitments and
      the
      repayment in full of the Loans and all other amounts due hereunder, shall be
      excluded from Nicor's Consolidated Indebtedness."

     

    2.15.
      Dividends
      and Other Shareholder Distributions.
      Section
      7.17(b)
      of the
      5-Year Credit Agreement shall be amended and restated in its entirety to read
      as
      follows: 

     

    "Section
      7.17 Dividends
      and Other Shareholder Distributions.

     

    ....

    (b)  Except
      as
      set forth on Schedule 7.17, neither Borrower will permit any of its Material
      Subsidiaries, directly or indirectly, to create or otherwise cause or suffer
      to
      exist or become effective any consensual encumbrance or restriction of any
      kind
      on the ability of any such Material Subsidiary to: (1) pay dividends or make
      any
      other distribution on any of such Material Subsidiary’s capital stock owned by a
      Borrower or any Material Subsidiary of a Borrower, (2) pay any Indebtedness
      owed
      to a Borrower or any other Material Subsidiary, (3) make loans or advances
      to a
      Borrower or any other Material Subsidiary, or (4) transfer any of its Property
      or assets to a Borrower or any other Material Subsidiary, except for such
      encumbrances or restrictions existing under or by reason of:

     

    (a) customary
      non-assignment provisions of any contract and customary provisions restricting
      assignment or subletting in any lease governing a leasehold interest of any
      Material Subsidiary; and 

     

    (b) customary
      restrictions contained in any consensual Liens that are permitted pursuant
      to
      Section 7.9."

     

    2.16.
      No
      Negative Pledges.
      Section
      7.18
      of the
      5-Year Credit Agreement shall be amended and restated in its entirety to read
      as
      follows: 

     

    10

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

    "Section
      7.18 No
      Negative Pledges. Except
      as
      set forth on Schedule 7.17, the Borrowers will not, and will not permit any
      of
      their Material Subsidiaries to enter into or suffer to exist any agreement
      (except the Credit Documents) prohibiting the creation or assumption of any
      security interest upon its properties or assets, whether now owned or hereafter
      acquired by the Borrowers or their Material Subsidiaries, as applicable;
provided,
      however,
      in the
      case of a consensual Lien on assets or property that is permitted pursuant
      to
      Section 7.9, the Lien holder may, solely with respect of the assets or property
      to which such Lien attaches, contract for and receive a negative pledge with
      respect thereto and the proceeds thereof."

     

    2.17.
      Transactions
      with Affiliates.
      Section
      7.19
      of the
      5-Year Credit Agreement shall be amended and restated in its entirety to read
      as
      follows: 

     

    "Section
      7.19 
Transactions
      with Affiliates. Neither
      Borrower will, nor will they permit any of their Subsidiaries to, enter into
      or
      be a party to any material transaction or arrangement with any Affiliate of
      such
      Person, including without limitation, for purchase from, sale to or exchange
      of
      Property with, for merger or consolidation with or into, or the rendering of
      any
      service by or for, any Affiliate, except (i) pursuant to the reasonable
      requirements of a Borrower’s or such Subsidiary’s business and upon terms no
      less favorable to a Borrower or such Subsidiary than could be obtained in a
      similar transaction involving a third-party, (ii) any ICC Regulated Transaction,
      (iii) to the extent such material transaction or arrangement would not result
      in
      a Material Adverse Effect, or (iv) as otherwise permitted in this
      Agreement."

     

    2.18.
      Non-Business
      Day.
      Section
      11.2
      of the
      5-Year Credit Agreement shall be amended and restated in its entirety to read
      as
      follows: 

     

    "Section
      11.2 
Non-Business
      Day.
      Except
      as otherwise expressly provided in this Agreement, if any payment of principal
      or interest on any Loan or of any other Obligation shall fall due on a day
      which
      is not a Business Day, interest or fees (as applicable) at the rate, if any,
      such Loan or other Obligation bears for the period prior to maturity shall
      continue to accrue on such Obligation from the stated due date thereof to and
      including the next succeeding Business Day, on which the same shall be
      payable.

     

    2.19.
      Notices. Section 11.6(a)(i) of the 5-Year Credit Agreement shall be amended
      and
      restated in its entirety to read as follows: 

     

    "Section
      11.6(a)  Notices
      Generally.
      

     

    ....

     

    (i)
       1844
      Ferry Road; Naperville, IL 60563

         
Attention:
      Treasurer

         
Fax:
      630-983-3810

         
Confirm
      No.: 630-388-2800

    ...."

    

    2.20
      Modified
      Compliance Certificate.
      Exhibit
      B
      shall be
      amended and restated in its entirety as set forth on Schedule 1.

     

    11

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    2.21.
      Amended
      Schedule 5.2.
      Schedule
      5.2 (Material
      Subsidiaries) shall
      be
      amended and restated in its entirety as set forth on Schedule 2.

     

    2.22.
      Permitted
      Investments.
      Schedule
      7.13
      (Permitted
      Investments)
      shall
      be deleted in its entirety from the 5-Year Credit Agreement. 

     

    2.23.
      Amended
      Schedule 7.17.
      Schedule
      7.17
      (Restrictions
      on Distributions and Existing Negative Pledges)
      shall
      be amended and restated in its entirety as set forth on Schedule 3.

     

    Section
      3.  Representations
      and Warranties.
      Each
      Borrower represents and warrants to the Lenders and the Administrative Agent
      that, after giving effect to this Amendment, (a) the representations and
      warranties set forth in Section
      5
      of the
      5-Year Credit Agreement are true and complete on the date hereof as if made
      on
      and as of the date hereof (or, if any such representation or warranty is
      expressly stated to have been made as of a specific date, such representation
      or
      warranty shall be true and correct as of such specific date), and as if each
      reference in said Section
      5
      to "this
      Agreement" included reference to this Amendment and (b) no Default or Event
      of
      Default has occurred and is continuing.

     

    Section
      4.  Conditions
      Precedent.
      The
      amendments set forth in Section
      2
      hereof
      shall become effective, as of the date hereof, upon the receipt by the
      Administrative Agent of (i) a legal opinion from counsel to the Borrower
      addressed to the Administrative Agent and the Lenders and (ii) counterparts
      of
      this Amendment executed by each Borrower, the Required Lenders and the
      Administrative Agent.

     

    Section
      5.  Waiver.
      The
      Required Lenders hereby waive all Defaults and Events of Default, if any, which
      may have occurred prior to the date of this Amendment resulting from (i) a
      failure by either Borrower to deliver documents to the Administrative Agent
      or
      the Lenders in accordance with Section 7.6 of the 5-Year Credit Agreement as
      in
      effect prior to this Amendment, (ii) any condition that existed or action or
      inaction by either Borrower that was not or may not have been in compliance
      with
      Sections 7.9, 7.13(e), 7.14(b), 7.17(b) or 7.18 of the 5-Year Credit Agreement
      as in effect prior to this Amendment, but would have been in compliance with
      the
      5-Year Credit Agreement as in effect on or after the date hereof, (iii) any
      inaccuracy in any representation or warranty made by either Borrower prior
      to
      this Amendment as to its compliance with Sections 7.6, 7.9, 7.13(e), 7.14(b),
      7.17(b) or 7.18 of the 5-Year Credit Agreement as in effect prior to this
      Amendment, (iv) any inaccuracy in the representation and warranty set forth
      in
      Section 5.12 of the 5-Year Credit Agreement as in effect prior to this Amendment
      or (v) a failure by either Borrower to provide notice of any such failure,
      condition, action, inaction or inaccuracy referred to in clauses (i) - (iv)
      above.

     

    Section
      6.  Miscellaneous.
      Except
      as herein provided, the 5-Year Credit Agreement shall remain unchanged and
      in
      full force and effect. This Amendment may be executed in any number of
      counterparts, all of which taken together shall constitute one and the same
      amendatory instrument and any of the parties hereto may execute this Amendment
      by signing any such counterpart. Delivery of an executed counterpart of a
      signature page of this Amendment by facsimile (or other electronic transmission)
      shall be effective as delivery of a manually executed counterparty hereof.
      This
      Amendment shall be governed by, and construed in accordance with, the law of
      the
      State of New York, United States of America, without giving effect to principles
      of conflicts of laws (other than Section 5-1401 of the New York General
      Obligations Law).

     

    12

    
      
        
          

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          

        

      

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Amendment to the 5-Year
      Credit Agreement to be duly executed and delivered as of the day and year first
      above written.

     

    NORTHERN
      ILLINOIS GAS COMPANY,

    as
      Borrower

    

    By:  /s/
      GERALD P.
      O'CONNOR                     
Name: Gerald
      P.
      O'Connor                                              

    Title:
      Vice President - Treasurer

    

     

    NICOR
      INC., 

    as
      Borrower

    

    

    By:  /s/
      GERALD P. O'CONNOR
                 
Name:
      Gerald P. O'Connor

    Title:
      Vice President - Treasurer

     

     

     

     

     

     

     

     

     

    SIGNATURE
      PAGE TO THE 5-YEAR CREDIT AGREEMENT AMENDMENT

     

    
      
        
          

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          

        

      

    

    

    

    JPMORGAN
      CHASE BANK, N. A.,

    in
      its
      individual capacity as a Lender and as Administrative Agent

    

    

    By:    /s/
      GABRIEL J. SIMON
                          

    Name:   Gabriel
      J. Simon                                 

    Title:   Assistant
      Vice President  
                 

     

     

     

     

     

     

     

     

     

    
      
        BANK
          SIGNATURE PAGE TO 5-YEAR CREDIT AGREEMENT AMENDMENT

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    ABN
      AMRO BANK N. V.

    

    

    By:    /s/ CHARLES
      F. RANDOLPH     

    Name:   Charles
      F.
      Randolph                

    Title:   Managing
      Director                    

    

    

    By:    /s/
      ECE
      Bennett                               

    Name:    Ece
      Bennett
                               

    Title:    Director                                      
      

     

     

     

     

     

     

     

     

     

    
      
        BANK
          SIGNATURE PAGE TO 5-YEAR CREDIT AGREEMENT AMENDMENT

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    THE
      BANK OF TOKYO-MITSUBISHI UFJ, LTD., CHICAGO BRANCH (F/K/A THE BANK OF
      TOKYO-MITSUBISHI, LTD., CHICAGO BRANCH)

    

    

    By:    /s/
      TSUGUYUKI UMENE     

    Name:   Tsuguyuki
      Umene            

    Title:   Deputy
      General Manager   

     

     

     

     

     

     

     

     

     

    
      
        BANK
          SIGNATURE PAGE TO 5-YEAR CREDIT AGREEMENT AMENDMENT

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    WACHOVIA
      BANK, N. A.

    

    

    By:   /s/
      SHAWN YOUNG
                    

    Name:   Shawn
      Young                            

    Title:   Vice
      President                              

     

     

     

     

     

     

     

     

     

    
      
        BANK
          SIGNATURE PAGE TO 5-YEAR CREDIT AGREEMENT AMENDMENT

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    U.S.
      BANK NATIONAL ASSOCIATION

    

    

    By:   /s/ JAMES
      N.
      DEVRIES                  
   

    Name:  James
      N. Devries           
                 

    Title:  Senior
      Vice
      President                      
  

     

     

     

     

     

     

     

     

     

    
      
        BANK
          SIGNATURE PAGE TO 5-YEAR CREDIT AGREEMENT AMENDMENT

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    THE
      BANK OF NEW YORK

    

    

    By:   /s/
      RICHARD K. FRONAPFEL, JR.   

    Name:   Richard
      K. Fronapfel,
      Jr.                 

    Title:  Vice
      President                                     

     

     

     

     

     

     

     

     

     

    
      
        BANK
          SIGNATURE PAGE TO 5-YEAR CREDIT AGREEMENT AMENDMENT

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    BANCO
      BILBAO VIZCAYA 

    ARGENTARIA
      S.A.

    

    

    By:  /s/
      MARIA T.
      VIZAN                                    
   

    Name:  Maria
      T.
      Vizan                                             
   

    Title:  Vice
      President - Global Corporate Banking   

    

    

    By:  /s/
      JOHN
      MARTINI                                    
     

    Name:  John
      Martini                                                 

    Title:  Vice
      President - Corporate
      Banking            

     

     

     

     

     

     

     

     

     

    
      
        BANK
          SIGNATURE PAGE TO 5-YEAR CREDIT AGREEMENT AMENDMENT

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    WELLS
      FARGO BANK, NATIONAL

    ASSOCIATION

    

    

    By:  /s/
      CHARLES W.
      REED                 

    Name:  Charles
      W.
      Reed                        

    Title:  Vice
      President                              

     

     

     

     

     

     

     

     

     

    
      
        BANK
          SIGNATURE PAGE TO 5-YEAR CREDIT AGREEMENT AMENDMENT

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    SUNTRUST
      BANK

    

    

    By:   /s/
      YANN
      PIRIO                                      

    Name:   Yann
      Pirio      
                                     

    Title:  Vice
      President                                        

     

     

     

     

     

     

     

     

     

    
      
        BANK
          SIGNATURE PAGE TO 5-YEAR CREDIT AGREEMENT AMENDMENT

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    MIZUHO
      CORPORATE BANK, LTD.

    

    

    By:  /s/
      RAYMOND
      VENTURA           

    Name:  Raymond
      Ventura                      

    Title:  Deputy
      General
      Manager           

    
      
        BANK
          SIGNATURE PAGE TO 5-YEAR CREDIT AGREEMENT AMENDMENT

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    FIFTH
      THIRD BANK (CHICAGO), 

    A
      MICHIGAN BANKING CORPORATION

    

    

    By:  /s/
      KIM PUSZCZEWICZ
              

    Name:  Kim
      Puszczewicz                        

    Title:  Vice
      President                               

     

     

     

     

     

     

     

     

    
      
        
          BANK
            SIGNATURE PAGE TO 5-YEAR CREDIT AGREEMENT AMENDMENT

          

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          

        

      

    

    SECOND
      AMENDMENT TO THE 5-YEAR CREDIT AGREEMENT 

     

    

     

    SCHEDULE
      1 TO THE AMENDMENT

     

    MODIFIED
      EXHIBIT B 

    COMPLIANCE
      CERTIFICATE

     

    COMPLIANCE
      CERTIFICATE

     

    This
      Compliance Certificate is furnished to JPMorgan Chase Bank, N.A., as
      Administrative Agent pursuant to the Credit Agreement dated as of September
      13,
      2005, among Northern Illinois Gas Company, an Illinois corporation
      (“Nicor
      Gas”),
      and
      Nicor Inc., an Illinois corporation (“Nicor”;
      Nicor
      Gas and Nicor are each referred to herein as a "Borrower"
      and
      collectively as "Borrowers")
      JPMorgan Chase Bank, N.A., as Administrative Agent and the financial
      institutions party thereto (as amended, supplemented or otherwise modified
      from
      time to time, the “Credit
      Agreement”).
      Unless otherwise defined herein, the terms used in this Compliance Certificate
      have the meanings ascribed thereto in the Credit Agreement.

     

    THE
      UNDERSIGNED HEREBY CERTIFIES THAT:

     

    1. I
      am the
      duly elected or appointed ___________________of Nicor;

     

    2. I
      have
      reviewed the terms of the Credit Agreement and I have made, or have caused
      to be
      made under my supervision, a detailed review of the transactions and conditions
      of Nicor and its Subsidiaries during the accounting period covered by the
      financial statements (which financial statements have been posted on Nicor's
      website on the Internet at www.nicor.com);

     

    3. The
      examinations described in paragraph 2 did not disclose, and I have no knowledge
      of, the existence of any condition or event which constitutes a Default or
      an
      Event of Default during or at the end of the accounting period covered by the
      Borrowers' financial statements for the year/quarter end (which financial
      statements have been posted on Nicor's website on the Internet at www.nicor.com)
      or as of the date of this Certificate, except as set forth below;
      and

     

    4. Schedule
      1 attached hereto sets forth financial data and computations evidencing
      compliance with certain covenants of the Credit Agreement, all of which data
      and
      computations are true, complete and correct. All computations are made in
      accordance with the terms of the Credit Agreement.

     

    Described
      below are the exceptions, if any, to paragraph 3 listing, in detail, the nature
      of the condition or event, the period during which it has existed and the action
      which the Borrower has taken, is taking, or proposes to take with respect to
      each such condition or event:

     

     

                                                                                                                                                                                                                                                                                
      

                                                                                                                                                                                                                                                                                
      

                                                                                                                                                                                                                                                                                
      

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    The
      foregoing certifications, together with the computations set forth in Schedule
      1
      hereto are made and delivered this ___________day of __________,
      200_.

     

    
      
        
          

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          

        

      

    

    

     

    SCHEDULE
      1 TO COMPLIANCE CERTIFICATE

     

    Compliance
      Calculations for Credit Agreement

     

    CALCULATION
      AS OF ________ __, 200_

     

    

     

    
      	
              A. Leverage
                Ratio (Section 7.15)

               

            	 	 
	
              1. Consolidated
                Net Worth

               

            	
              $                                                     
                

               

            	 
	
              2. Consolidated
                Indebtedness

               

            	
              $                                                     
                

               

            	 
	
              3. Capital
                (Line A1 plus Line A2)

               

            	
              $                                                     
                

               

            	 
	
              4. Leverage
                Ratio

               

            	
                            
                :1.00

               

            	
              (ratio
                of Line A2 to Line A3 not to exceed 0.70:1.00)

               

            
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 

    

    

     

    
      
        
          

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          

        

      

    

    SCHEDULE
      2 TO THE AMENDMENT

     

    

     

    AMENDED
      SCHEDULE 5.2

     

    

     

    MATERIAL
      SUBSIDIARIES

     

    
      	 	 	 
	
              Subsidiary
                Name

               

            	
              Place
                of Origin

               

            	
              Ownership

               

            
	
              Northern
                Illinois Gas Company d/b/a Nicor Gas Company

               

            	
              Illinois

               

            	
              Wholly

               

              owned
                by 

               

              Nicor
                Inc.

               

            
	
              Birdsall
                Inc.

               

            	
              Florida

               

            	
              Wholly

               

              owned
                by

               

              Nicor
                Inc.

               

            
	
               

               

              Tropical
                Shipping and Construction Company Limited

               

            	
              Cayman
                Islands

               

            	
              Wholly
                owned by Birdsall Inc.

               

            

    

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SCHEDULE
      3 TO THE AMENDMENT

     

    

     

    AMENDED
      SCHEDULE 7.17

     

    

     

    RESTRICTIONS
      ON DISTRIBUTIONS AND EXISTING NEGATIVE PLEDGES

     

    

     

    

     

    Refer
      to
      (i) Nicor Gas Indenture as defined in Section 1, (ii) the 210-Day Facility
      Agreement as defined in Section 1, (iii) the 2 Year Term Loan Agreement as
      defined in Section 1 and (iv) the Guaranty as defined in Section 1.Exhibit 10-1 - 10-Q JAS 2006

    
      

        THE
          PROCTER & GAMBLE 2001 STOCK AND INCENTIVE COMPENSATION
          PLAN

        (as
          adjusted for stock split on May 21, 2004 and amended on October 10,
          2006)

        

        

        ARTICLE
          A -- Purpose.

        

        The
          purposes of The Procter & Gamble 2001 Stock and Incentive Compensation Plan
          (the "Plan") are to strengthen the alignment of interests between those
          employees of The Procter & Gamble Company (the "Company") and its
          subsidiaries who are largely responsible for the success of the business
          (the
“Participants”) and the Company's shareholders through ownership behavior and
          the increased ownership of shares of the Company's common stock (the “Common
          Stock”), and to encourage the Participants to remain in the employ of the
          Company and its subsidiaries. This will be accomplished through the granting
          of
          options to purchase shares of Common Stock, the granting of performance
          related
          awards, the payment of a portion of the Participants' remuneration in shares
          of
          Common Stock, the granting of deferred awards related to the increase in
          the
          price of Common Stock, and the granting of restricted stock units (“RSUs”) or
          other awards that are related to the price of Common Stock.

        

        ARTICLE
          B -- Administration.

        

        1. The
          Plan
          shall be administered by the Compensation Committee (the "Committee") of
          the
          Board of Directors of the Company (the "Board"), or such other committee
          as may
          be designated by the Board. The Committee shall consist of not fewer than
          three
          (3) members of the Board who are "Non-Employee Directors" as defined in
          Rule
          16b-3 under the Securities Exchange Act of 1934, as amended (the "1934
          Act"), or
          any successor rule or definition adopted by the Securities and Exchange
          Commission, to be appointed by the Board from time to time and to serve
          at the
          discretion of the Board. The Committee may establish such regulations,
          provisions, and procedures within the terms of the Plan as, in its opinion,
          may
          be advisable for the administration and operation of the Plan, and may
          designate
          the Secretary of the Company or other employees of the Company to assist
          the
          Committee in the administration and operation of the Plan and may grant
          authority to such persons to execute documents on behalf of the Committee.
          The
          Committee shall report to the Board on the administration of the Plan not
          less
          than once each year.

        

        2. Subject
          to the express provisions of the Plan, the Committee shall have authority:
          to
          grant nonstatutory and incentive stock options; to grant stock appreciation
          rights either freestanding or in tandem with simultaneously granted stock
          options; to grant Performance Awards (as defined in Article J); to award
          a
          portion of a Participant's remuneration in shares of Common Stock subject
          to
          such conditions or restrictions, if any, as the Committee may determine;
          to
          award RSUs or other awards that are related to the price of Common Stock;
          to
          determine all the terms and provisions of the respective stock option,
          stock
          appreciation right, stock award, RSU, or other award agreements including
          setting the dates when each stock option or stock appreciation right or
          part
          thereof may be exercised and determining the conditions and restrictions,
          if
          any, of any shares of Common Stock acquired through the exercise of any
          stock
          option; to provide for special terms for any stock options, stock appreciation
          rights, stock awards, RSUs or other awards granted to Participants who
          are
          foreign nationals or who are employed by the Company or any of its subsidiaries
          outside of the United States of America in order to fairly accommodate
          for
          differences in local law, tax policy or custom and to approve such supplements
          to or amendments, restatements or alternative versions of the Plan as the
          Committee may consider necessary or appropriate for such purposes (without
          affecting the terms of the Plan for any other purpose); and to make all
          other
          determinations it deems necessary or advisable for administering the Plan.
          In
          addition, at the time of grant the Committee shall have the further authority
          to:

        

        
          	 	
                  (a)

                	
                  waive
                    the provisions of Article F, Paragraph
                    1(a);

                

        

        

        
          	 	
                  (b)

                	
                  waive
                    the provisions of Article F, Paragraph
                    1(b);

                

        

        

        
          	 	
                  (c)

                	
                  waive
                    the provisions of Article G, Paragraph 4(a), 4(b) and 4(c);
                    and

                

        

        

        
          	 	
                  (d)

                	
                  impose
                    conditions in lieu of those set forth in Article G, Paragraphs
                    4 through
                    7, for nonstatutory stock options, stock appreciation rights,
                    stock
                    awards, RSUs, or Performance Awards which do not increase or
                    extend the
                    rights of the Participant.

                

        

        

        ARTICLE
          C -- Participation.

        

        The
          Committee shall select as Participants those employees of the Company and
          its
          subsidiaries who, in the opinion of the Committee, have demonstrated a
          capacity
          for contributing in a substantial manner to the success of such
          companies.

        

        ARTICLE
          D -- Limitation on Number of Shares Available Under the
          Plan.

        

        1. Unless
          otherwise authorized by the shareholders and subject to Paragraph 2 of
          this
          Article D, the maximum aggregate number of shares available for award under
          the
          Plan shall be one hundred ninety million (190,000,000) shares. Any of the
          authorized shares may be used for any of the types of awards described
          in the
          Plan, except that no more than fifteen percent (15%) of the authorized
          shares
          may be awarded as restricted or unrestricted stock.

        

        2. In
          addition to the shares authorized for award by Paragraph 1 of this Article,
          the
          following shares may be awarded under the Plan:

        

        (a) shares
          that were authorized to be awarded under The Procter & Gamble 1992 Stock
          Plan (the “1992 Plan”), but that were not awarded under the 1992
          Plan;

        

        (b) shares
          awarded under the Plan or the 1992 Plan that are subsequently forfeited
          in
          accordance with the Plan or the 1992 Plan, respectively;

        

        (c) shares
          tendered by a Participant in payment of all or part of the exercise price
          of a
          stock option awarded under the Plan or the 1992 Plan;

        

        (d) shares
          tendered by or withheld from a Participant in satisfaction of withholding
          tax
          obligations with respect to a stock option awarded under the Plan or the
          1992
          Plan.

        

        ARTICLE
          E -- Shares Subject to Use Under the Plan.

        

        1. The
          shares to be delivered by the Company upon exercise of stock options or
          stock
          appreciation rights shall be determined by the Board and may consist, in
          whole
          or in part, of authorized but unissued shares or treasury shares. In the
          case of
          redemption of stock appreciation rights by one of the Company's subsidiaries,
          such shares shall be shares acquired by that subsidiary.

        

        2. For
          purposes of the Plan, restricted or unrestricted stock awarded or issued
          following redemption of RSUs under the terms of the Plan shall be authorized
          but
          unissued shares, treasury shares, or shares acquired in the open market
          by the
          Company or a subsidiary, as determined by the Board.

        

        ARTICLE
          F -- Stock Options and Stock Appreciation Rights.

        

        1. In
          addition to such other conditions as may be established by the Committee,
          in
          consideration of the granting of stock options or stock appreciation rights
          under the terms of the Plan, each Participant agrees as follows:

        

        
          	 	
                  (a)

                	
                  The
                    right to exercise any stock option or stock appreciation right
                    shall be
                    conditional upon certification by the Participant at time of
                    exercise that
                    the Participant intends to remain in the employ of the Company
                    or one of
                    its subsidiaries for at least one (1) year following the date
                    of the
                    exercise of the stock option or stock appreciation right (provided
                    that
                    termination of employment due to Retirement or Special Separation
                    shall
                    not constitute a breach of such certification),
                    and,

                

        

        

        
          	 	
                  (b)

                	
                  In
                    order to better protect the goodwill of the Company and its subsidiaries
                    and to prevent the disclosure of the Company's or its subsidiaries'
                    trade
                    secrets and confidential information and thereby help insure
                    the long-term
                    success of the business, the Participant, without prior written
                    consent of
                    the Company, will not engage in any activity or provide any services,
                    whether as a director, manager, supervisor, employee, adviser,
                    consultant
                    or otherwise, for a period of three (3) years following the date
                    of the
                    Participant's termination of employment with the Company, in
                    connection
                    with the manufacture, development, advertising, promotion, or
                    sale of any
                    product which is the same as or similar to or competitive with
                    any
                    products of the Company or its subsidiaries (including both existing
                    products as well as products known to the Participant, as a consequence
                    of
                    the Participant's employment with the Company or one of its subsidiaries,
                    to be in development):

                

        

        

        (1) with
          respect to which the Participant's work has been directly concerned at
          any time
          during the two (2) years preceding termination of employment with the Company
          or
          one of its subsidiaries or

        

        (2) with
          respect to which during that period of time the Participant, as a consequence
          of
          the Participant's job performance and duties, acquired knowledge of trade
          secrets or other confidential information of the Company or its
          subsidiaries.

        

        For
          purposes of this paragraph, it shall be conclusively presumed that Participants
          have knowledge of information they were directly exposed to through actual
          receipt or review of memos or documents containing such information, or
          through
          actual attendance at meetings at which such information was discussed or
          disclosed.

        

        
          	 	
                  (c)

                	
                  The
                    provisions of this Article are not in lieu of, but are in addition
                    to the
                    continuing obligation of the Participant (which Participant hereby
                    acknowledges) to not use or disclose the Company's or its subsidiaries'
                    trade secrets and confidential information known to the Participant
                    until
                    any particular trade secret or confidential information become
                    generally
                    known (through no fault of the Participant), whereupon the restriction
                    on
                    use and disclosure shall cease as to that item. Information regarding
                    products in development, in test marketing or being marketed
                    or promoted
                    in a discrete geographic region, which information the Company
                    or one of
                    its subsidiaries is considering for broader use, shall not be
                    deemed
                    generally known until such broader use is actually commercially
                    implemented. As used in this Article, "generally known" means
                    known
                    throughout the domestic U. S. industry or, in the case of Participants
                    who
                    have job responsibilities outside of the United States, the appropriate
                    foreign country or countries' industry. As used in this Article,
                    "trade
                    secrets and other confidential information" also includes personnel
                    knowledge about a manager, or managers, of the Company or its
                    subsidiaries
                    gained in the course of Participant’s employment with the Company or its
                    subsidiaries (including personnel ratings or rankings, manager
                    or peer
                    evaluations, performance records, special skills or abilities,
                    compensation, work and development plans, training, nature of
                    specific
                    project and work assignments, or specialties developed as a result
                    of such
                    assignments) which directly or indirectly affords the Participant
                    a
                    confidential basis to solicit, encourage, or participate in soliciting
                    any
                    manager, or managers, of the Company or any subsidiary to terminate
                    his or
                    her relationship with the Company or that subsidiary.  

                

        

        

        
          	 	
                  (d)

                	
                  By
                    acceptance of any offered stock option or stock appreciation
                    rights
                    granted under the terms of the Plan, the Participant acknowledges
                    that if
                    the Participant were, without authority, to use or disclose the
                    Company's
                    or any of its subsidiaries' trade secrets or confidential information
                    or
                    threaten to do so, the Company or one of its subsidiaries would
                    be
                    entitled to injunctive and other appropriate relief to prevent
                    the
                    Participant from doing so. The Participant acknowledges that
                    the harm
                    caused to the Company by the breach or anticipated breach of
                    this Article
                    is by its nature irreparable because, among other things, it
                    is not
                    readily susceptible of proof as to the monetary harm that would
                    ensue. The
                    Participant consents that any interim or final equitable relief
                    entered by
                    a court of competent jurisdiction shall, at the request of the
                    Company or
                    one of its subsidiaries, be entered on consent and enforced by
                    any court
                    having jurisdiction over the Participant, without prejudice to
                    any rights
                    either party may have to appeal from the proceedings which resulted
                    in any
                    grant of such relief.

                

        

        

        
          	 	
                  (e)

                	
                  If
                    any of the provisions contained in this Article F shall for any
                    reason,
                    whether by application of existing law or law which may develop
                    after the
                    Participant's acceptance of an offer of the granting of stock
                    appreciation
                    rights or stock options, be determined by a court of competent
                    jurisdiction to be overly broad as to scope of activity, duration,
                    or
                    territory, the Participant agrees to join the Company or any
                    of its
                    subsidiaries in requesting such court to construe such provision
                    by
                    limiting or reducing it so as to be enforceable to the extent
                    compatible
                    with then applicable law. If any one or more of the terms, provisions,
                    covenants, or restrictions of this Article shall be determined
                    by a court
                    of competent jurisdiction to be invalid, void or unenforceable,
                    then the
                    remainder of the terms, provisions, covenants, and restrictions
                    of this
                    Article shall remain in full force and effect and shall in no
                    way be
                    affected, impaired, or invalidated.

                

        

        

        2. The
          fact
          that a Participant has been granted a stock option or a stock appreciation
          right
          under the Plan shall not limit the right of the employer to terminate the
          Participant's employment at any time. 

        

        Because
          a
          main purpose of the Plan is to strengthen the alignment of interests between
          employees of the Company (including all subsidiaries) and its shareholders
          to
          ensure the continued success of the Company, the Committee is authorized
          to
          suspend or terminate any outstanding stock option or stock appreciation
          right of
          a Participant if the Committee determines the Participant has acted
          significantly contrary to the best interests of the Company or its subsidiaries.
          For purposes of this paragraph, an action taken “significantly contrary to the
          best interests of the Company or its subsidiaries” includes without limitation
          any action taken or threatened by the Participant that the Committee determines
          has, or is reasonably likely to have, a significant adverse impact on the
          reputation, goodwill, stability, operation, personnel retention and management,
          or business of the Company or any subsidiary. This paragraph is in addition
          to
          any remedy the Company or a subsidiary may have at law or in equity, including
          without limitation injunctive and other appropriate relief.

        

        3. The
          maximum number of shares with respect to which stock options or stock
          appreciation rights may be granted to any Participant in any calendar year
          shall
          not exceed 2,000,000 shares.

        

        4. The
          aggregate fair market value (determined at the time when the incentive
          stock
          option is exercisable for the first time by a Participant during any calendar
          year) of the shares for which any Participant may be granted incentive
          stock
          options under the Plan and all other stock option plans of the Company
          and its
          subsidiaries in any calendar year shall not exceed $100,000 (or such other
          amount as reflected in the limits imposed by Section 422(d) of the Internal
          Revenue Code of 1986, as it may be amended from time to time).

        

        5. If
          the
          Committee grants incentive stock options, all such stock options shall
          contain
          such provisions as permit them to qualify as "incentive stock options"
          within
          the meaning of Section 422 of the Internal Revenue Code of 1986, as may
          be
          amended from time to time.

        

        6. With
          respect to stock options granted in tandem with stock appreciation rights,
          the
          exercise of either such stock options or such stock appreciation rights
          will
          result in the simultaneous cancellation of the same number of tandem stock
          appreciation rights or stock options, as the case may be.

        

        7. The
          exercise price for all stock options and stock appreciation rights shall
          be
          established by the Committee at the time of their grant and shall be not
          less
          than one hundred percent (100%) of the fair market value of the Common
          Stock on
          the date of grant.

        

        8. Unless
          otherwise authorized by the shareholders of the Company, neither the Board
          nor
          the Committee shall authorize the amendment of any outstanding stock option
          or
          stock appreciation right to reduce the exercise price.

        

        9. No
          stock
          option or stock appreciation right shall be cancelled and replaced with
          awards
          having a lower exercise price without the prior approval of the shareholders
          of
          the Company. This Article F, Paragraph 9 is intended to prohibit the repricing
          of “underwater” stock options and stock appreciation rights and shall not be
          construed to prohibit the adjustments permitted under Article K of the
          Plan.

        

        10. The
          Committee may require any Participant to accept any stock options or stock
          appreciation rights by means of electronic signature.

        

        ARTICLE
          G -- Exercise of Stock Options and Stock Appreciation
          Rights.

        

        1. All
          stock
          options and stock appreciation rights granted hereunder shall have a maximum
          life of no more than ten (10) years from the date of grant.

        

        2. No
          stock
          options or stock appreciation rights shall be exercisable within one (1)
          year
          from their date of grant, except in the case of the death of the
          Participant.

        

        3. Unless
          a
          transfer has been duly authorized by the Committee pursuant to Article
          G,
          Paragraph 6 of the Plan, during the lifetime of the Participant, stock
          options
          and stock appreciation rights may be exercised only by the Participant
          personally, or, in the event of the legal incompetence of the Participant,
          by
          the Participant's duly appointed legal guardian.

        

        4. In
          the
          event that a Participant ceases to be an employee of the Company or any
          of its
          subsidiaries while holding an unexercised stock option or stock appreciation
          right:

        

        
          	 	
                  (a)

                	
                  Any
                    unexercisable portions thereof are then void, except in the case
                    of: (1)
                    death of the Participant; (2) Retirement or Special Separation
                    that occurs
                    more than six months from the date the options were granted;
                    or (3) any
                    option as to which the Committee has waived, at the time of grant,
                    the
                    provisions of this Article G, Paragraph
                    4(a).

                

        

        

        
          	 	
                  (b)

                	
                  Any
                    exercisable portions thereof are then void, except in the case
                    of: (1)
                    death of the Participant; (2) Retirement or Special Separation;
                    or (3) any
                    option as to which the Committee has waived, at the time of grant,
                    the
                    provisions of this Article G, Paragraph
                    4(b).

                

        

        

        
          	(c) 
 	
                  In
                    the case of Special Separation, any stock option or stock appreciation
                    right must be exercised within the time specified in the original
                    grant or
                    five (5) years from the date of Special Separation, whichever
                    is
                    shorter.

                

        

        

        5. In
          the
          case of the death of a Participant, the persons to whom the stock options
          or
          stock appreciation rights have been transferred by will or the laws of
          descent
          and distribution shall have the privilege of exercising remaining stock
          options,
          stock appreciation rights or parts thereof, whether or not exercisable
          on the
          date of death of such Participant, at any time prior to the expiration
          date of
          the stock options or stock appreciation rights.

         

        6. Stock
          options and stock appreciation rights are not transferable other than by
          will or
          by the laws of descent and distribution. For the purpose of exercising
          stock
          options or stock appreciation rights after the death of the Participant,
          the
          duly appointed executors and administrators of the estate of the deceased
          Participant shall have the same rights with respect to the stock options
          and
          stock appreciation rights as legatees or distributees would have after
          distribution to them from the Participant's estate. Notwithstanding the
          foregoing, the Committee may authorize the transfer of stock options and
          stock
          appreciation rights upon such terms and conditions as the Committee may
          require.
          Such transfer shall become effective only upon the Committee’s complete
          satisfaction that the proposed transferee has strictly complied with such
          terms
          and conditions, and both the original Participant and the transferee shall
          be
          subject to the same terms and conditions hereunder as the original
          Participant.

        

        7. Upon
          the
          exercise of stock appreciation rights, the Participant shall be entitled
          to
          receive a redemption differential for each such stock appreciation right
          which
          shall be the difference between the then fair market value of one share
          of
          Common Stock and the exercise price of one stock appreciation right then
          being
          exercised. In the case of the redemption of stock appreciation rights by
          a
          subsidiary of the Company not located in the United States, the redemption
          differential shall be calculated in United States dollars and converted
          to the
          appropriate local currency on the exercise date. As determined by the Committee,
          the redemption differential may be paid in cash, Common Stock to be valued
          at
          its fair market value on the date of exercise, any other mode of payment
          deemed
          appropriate by the Committee or any combination thereof.

        

        8. Time
          spent on leave of absence shall be considered as employment for the purposes
          of
          the Plan. Leave of absence means any period of time away from work granted
          to
          any employee by his or her employer because of illness, injury, or other
          reasons
          satisfactory to the employer.

        

        9. The
          Company reserves the right from time to time to suspend the exercise of
          any
          stock option or stock appreciation right where such suspension is deemed
          by the
          Company as necessary or appropriate for corporate purposes. No such suspension
          shall extend the life of the stock option or stock appreciation right beyond
          its
          expiration date, and in no event will there be a suspension in the five
          (5)
          calendar days immediately preceding the expiration date.

        

        10. The
          Committee may require any Participant to exercise any stock options or
          stock
          appreciation rights by means of electronic signature.

        

        ARTICLE
          H -- Payment for Stock Options and Tax Withholding.

        

        Upon
          the
          exercise of a stock option, payment in full of the exercise price shall
          be made
          by the Participant. As determined by the Committee, the stock option exercise
          price may be paid by the Participant either in cash, shares of Common Stock
          valued at their fair market value on the date of exercise, a combination
          thereof, or such other method as determined by the Committee. In addition
          to
          payment of the exercise price, the Committee may authorize the Company
          to charge
          a reasonable administrative fee for the exercise of any stock option.
          Furthermore, to the extent the Company is required to withhold federal,
          state,
          local or foreign taxes in connection with any Participant’s stock option
          exercise, the Committee may require the Participant to make such arrangements
          as
          the Company may deem necessary for the payment of such taxes required to
          be
          withheld (including, without limitation, relinquishment of a portion of
          such
          stock options or relinquishment of a portion of the proceeds received by
          the
          Participant in a simultaneous exercise and sale of stock during a “cashless”
exercise). In no event, however, shall the Committee be permitted to require
          payment from a Participant in excess of the maximum required tax withholding
          rates.

        

        ARTICLE
          I -- Grant of Unrestricted Stock, Restricted Stock or
          RSUs.

        

        The
          Committee may grant Common Stock or RSUs to Participants under the Plan
          subject
          to such conditions or restrictions, if any, as the Committee may determine.
          To
          the extent the Company is required to withhold federal, state, local or
          foreign
          taxes in connection with the lapse of restrictions on any Participant’s shares
          of Common Stock, the Committee may require the Participant to make such
          arrangements as the Company may deem necessary for the payment of such
          taxes
          required to be withheld (including, without limitation, relinquishment
          of a
          portion of such shares of Common Stock). In no event, however, shall the
          Committee be permitted to require payment from a Participant in excess
          of the
          maximum required tax withholding rates.

        

        ARTICLE
          J -- Performance Related Awards.

        

        1. The
          Committee, in its discretion, may establish performance goals for selected
          Participants and authorize the granting of cash, stock options, stock
          appreciation rights, Common Stock, RSUs or other awards that are related
          to the
          price of Common Stock, other property, or any combination thereof (“Performance
          Awards”) to such Participants upon achievement of such established performance
          goals during a specified time period (the “Performance Period”). The Committee,
          in its discretion, shall determine the Participants eligible for Performance
          Awards, the performance goals to be achieved during each Performance Period,
          the
          amount of any Performance Awards to be paid, and the method of payment
          for any
          Performance Awards. Performance Awards may be granted either alone or in
          addition to other grants made under the Plan.

        

        2. Notwithstanding
          the foregoing, any Performance Awards granted to the Chief Executive and
          the
          Company’s other four highest paid executive officers (as reported in the
          Company’s proxy statement pursuant to Regulation S-K, Item 402(a)(3)) under
          Article J, Paragraph 1 shall comply with all of the following
          requirements:

        

        
          	 	
                  (a)

                	
                  Each
                    grant shall specify the specific performance objectives (the
“Performance
                    Objectives”) which, if achieved, will result in payment or early payment
                    of the Performance Award. The Performance Objectives may be described
                    in
                    terms of Company-wide objectives that are related to the individual
                    Participant or objectives that are related to a subsidiary, division,
                    department, region, function or business unit of the Company
                    in which the
                    Participant is employed, and may consist of one or more or any
                    combination
                    of the following criteria: stock price, market share, sales revenue,
                    cash
                    flow, earnings per share, return on equity, total shareholder
                    return,
                    gross margin, stock price growth measures, operating total shareholder
                    return, net earnings or net income (before or after taxes), return
                    on
                    assets or capital, earnings (before or after interest, taxes,
                    depreciation
                    and/or amortization), operating margin, acquisition integration
                    metrics,
                    economic value added, and/or costs. The Performance Objectives
                    may be made
                    relative to the performance of other corporations. The Committee,
                    in its
                    discretion, may change or modify these criteria, however, at
                    all times the
                    criterion must be valid performance criterion for purposes of
                    Section
                    162(m) of the Internal Revenue Code of 1986, as amended (the
“Code”). The
                    Committee may not change the criteria or Performance Objectives
                    for any
                    Performance Period that has already been approved by the Committee.
                    The
                    Committee may cancel a Performance Period or replace a Performance
                    Period
                    with a new Performance Period, provided that any such cancellation
                    or
                    replacement shall not cause the Performance Award to fail to
                    meet the
                    requirements of Section 162(m) of the
                    Code.

                

        

        

        
          	 	
                  (b)

                	
                  Each
                    grant shall specify the minimum level of achievement required
                    by the
                    Participant relative to the Performance Objectives to qualify
                    for a
                    Performance Award. In doing so, the grant shall establish a formula
                    for
                    determining the percentage of the Performance Award to be awarded
                    if
                    performance is at or above the minimum level, but falls short
                    of full
                    achievement of the specified Performance Objectives. Each grant
                    may also
                    establish a formula for determining an additional award above
                    and beyond
                    the Performance Award to be granted to the Participant if performance
                    is
                    at or above the specified Performance Objectives. Such additional
                    award
                    shall also be established as a percentage of the Performance
                    Award. The
                    Committee may decrease a Performance Award as determined by the
                    Performance Objectives, but in no case may the Committee increase
                    any
                    Performance Award as determined by the Performance
                    Objectives.

                

        

        

        
          	 	
                  (c)

                	
                  The
                    maximum Performance Award that may be granted to any Participant
                    for any
                    one-year Performance Period shall not exceed $20,000,000 or 800,000
                    shares
                    of Common Stock (the “Annual Maximum”). The maximum Performance Award that
                    may be granted to any Participant for a Performance Period greater
                    than
                    one year shall not exceed the Annual Maximum multiplied by the
                    number of
                    full years in the Performance
                    Period.

                

        

        

        ARTICLE
          K -- Adjustments.

        

        In
          the
          event of any future reorganization, recapitalization, stock split, stock
          dividend, combination of shares, merger, consolidation, rights offering,
          share
          exchange, reclassification, distribution, spin-off or other change affecting
          the
          corporate structure, capitalization or Common Stock of the Company occuring
          after the date of approval of the Plan by the Company's shareholders, (i)
          the
          amount of shares authorized to be issued under the Plan and (ii) the number
          of
          shares and/or the exercise prices covered by outstanding stock options,
          stock
          appreciation rights or RSUs shall be adjusted appropriately and equitably
          to
          prevent dilution or enlargement of rights under the Plan. Following any
          such
          change, the term "Common Stock" shall be deemed to refer to such class
          of shares
          or other securities as may be applicable.

        

        ARTICLE
          L -- Additional Provisions and Definitions.

        

        1. The
          Board
          may, at any time, repeal the Plan or may amend it except that no such amendment
          may amend this paragraph, increase the total aggregate number of shares
          subject
          to the Plan, reduce the price at which stock options or stock appreciation
          rights may be granted or exercised, alter the class of employees eligible
          to
          receive stock options, or increase the percentage of shares authorized
          to be
          transferred as restricted or unrestricted stock. Participants and the Company
          shall be bound by any such amendments as of their effective dates, but
          if any
          outstanding stock options or stock appreciation rights are materially affected
          adversely, notice thereof shall be given to the Participants holding such
          stock
          options and stock appreciation rights and such amendments shall not be
          applicable without such Participant’s written consent. If the Plan is repealed
          in its entirety, all theretofore granted unexercised stock options or stock
          appreciation rights shall continue to be exercisable in accordance with
          their
          terms and shares subject to conditions or restrictions granted pursuant
          to the
          Plan shall continue to be subject to such conditions or
          restrictions.

        

        2. In
          the
          case of a Participant who is an employee of a subsidiary of the Company,
          performance under the Plan, including the granting of shares of the Company,
          may
          be by the subsidiary. Nothing in the Plan shall affect the right of the
          Company
          or any subsidiary to terminate the employment of any employee with or without
          cause. None of the Participants, either individually or as a group, and
          no
          beneficiary, transferee or other person claiming under or through any
          Participant, shall have any right, title, or interest in any shares of
          the
          Company purchased or reserved for the purpose of the Plan except as to
          such
          shares, if any, as shall have been granted or transferred to him or her.
          Nothing
          in the Plan shall preclude the awarding or granting of shares of the Company
          to
          employees under any other plan or arrangement now or hereafter in
          effect.

        

        3. "Subsidiary"
          means any company in which more than fifty percent (50%) of the total combined
          voting power of all classes of stock is owned, directly or indirectly,
          by the
          Company or, if the company does not issue stock, more than fifty percent
          (50%)
          of the total combined ownership interest is owned, directly or indirectly,
          by
          the Company. In addition, the Board may designate for participation in
          the Plan
          as a "subsidiary," except for the granting of incentive stock options,
          those
          additional companies affiliated with the Company in which the Company's
          direct
          or indirect stock ownership is fifty percent (50%) or less of the total
          combined
          voting power of all classes of such company's stock, or, if the company
          does not
          issue stock, the Company’s direct or indirect ownership is fifty percent (50%)
          or less of the company’s total combined ownership interest.

        

        4. Notwithstanding
          anything to the contrary in the Plan, stock options and stock appreciation
          rights granted hereunder shall vest immediately and any conditions or
          restrictions on Common Stock shall lapse upon a “Change in Control.” A “Change
          in Control” shall mean the occurrence of any of the following:

        

        (a)    An
          acquisition (other than directly from the Company) of any voting securities
          of
          the Company (the "Voting Securities") by any "Person" (as the term person
          is
          used for purposes of Section 13(d) or 14(d) of the Exchange Act), immediately
          after which such Person has "Beneficial Ownership" (within the meaning
          of Rule
          13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more
          of the
          then outstanding shares or the combined voting power of the Company's then
          outstanding Voting Securities;
          provided, however,
          in
          determining whether a Change in Control has occurred pursuant to this Paragraph
          4(a), shares or Voting Securities which are acquired in a "Non-Control
          Acquisition" (as hereinafter defined) shall not constitute an acquisition
          which
          would cause a Change in Control. A "Non-Control Acquisition" shall mean
          an
          acquisition by (i) an employee benefit plan (or a trust forming a part
          thereof)
          maintained by (A) the Company or (B) any corporation or other Person of
          which a
          majority of its voting power or its voting equity securities or equity
          interest
          is owned, directly or indirectly, by the Company (for purposes of this
          definition, a "Related Entity"), (ii) the Company or any Related Entity,
          or
          (iii) any Person in connection with a "Non-Control Transaction" (as hereinafter
          defined);

         

        (b)     
          The
          individuals who, as of July 10, 2001 are members of the Board (the "Incumbent
          Board"), cease for any reason to constitute at least half of the members
          of the
          Board; or, following a Merger (as hereinafter defined) which results in
          a Parent
          Corporation (as hereinafter defined), the board of directors of the ultimate
          Parent Corporation; provided,
          however,
          that if
          the election, or nomination for election by the Company's common stockholders,
          of any new director was approved by a vote of at least two-thirds of the
          Incumbent Board, such new director shall, for purposes of the Plan, be
          considered as a member of the Incumbent Board; provided
          further, however,
          that no
          individual shall be considered a member of the Incumbent Board if such
          individual initially assumed office as a result of either an actual or
          threatened "Election Contest" (as described in Rule 14a-11 promulgated
          under the
          Exchange Act) or other actual or threatened solicitation of proxies or
          consents
          by or on behalf of a Person other than the Board (a "Proxy Contest") including
          by reason of any agreement intended to avoid or settle any Election Contest
          or
          Proxy Contest; or 

         

        (c)   
          The
          consummation of:

         

        (i) 
A
          merger,
          consolidation or reorganization with or into the Company or in which securities
          of the Company are issued (a “Merger”), unless such Merger is a "Non-Control
          Transaction." A "Non-Control Transaction" shall mean a Merger
          where:

         

        
          	 	
                  (A)

                	
                  the
                    stockholders of the Company, immediately before such Merger own
                    directly
                    or indirectly immediately following such Merger at least fifty
                    percent
                    (50%) of the combined voting power of the outstanding voting
                    securities of
                    (x) the corporation resulting from such Merger (the "Surviving
                    Corporation") if fifty percent (50%) or more of the combined
                    voting power
                    of the then outstanding voting securities of the Surviving Corporation
                    is
                    not Beneficially Owned, directly or indirectly by another Person
                    (a
                    "Parent Corporation"), or (y) if there is one or more Parent
                    Corporations,
                    the ultimate Parent Corporation; 

                

        

         

        
          	 	
                  (B)

                	
                  the
                    individuals who were members of the Incumbent Board immediately
                    prior to
                    the execution of the agreement providing for such Merger constitute
                    at
                    least half of the members of the board of directors of (x) the
                    Surviving
                    Corporation, if there is no Parent Corporation, or (y) if there
                    is one or
                    more Parent Corporations, the ultimate Parent Corporation;
                    and

                

        

         

        
          	 	
                  (C)

                	
                  no
                    Person other than (1) the Company, (2) any Related Entity, (3)
                    any
                    employee benefit plan (or any trust forming a part thereof) that,
                    immediately prior to such Merger was maintained by the Company
                    or any
                    Related Entity, or (4) any Person who, immediately prior to such
                    merger,
                    consolidation or reorganization had Beneficial Ownership of twenty
                    percent
                    (20%) or more of the then outstanding Voting Securities or shares,
                    has
                    Beneficial Ownership of twenty percent (20%) or more of the combined
                    voting power of the outstanding voting securities or common stock
                    of (x)
                    the Surviving Corporation if there is no Parent Corporation,
                    or (y) if
                    there is one or more Parent Corporations, the ultimate Parent
                    Corporation;

                

        

         

        (ii)       
          A
          complete liquidation or dissolution of the Company; or

         

        (iii) 
The
          sale
          or other disposition of all or substantially all of the assets of the Company
          to
          any Person (other than a transfer to a Related Entity or under conditions
          that
          would constitute a Non-Control Transaction with the disposition of assets
          being
          regarded as a Merger for this purpose or the distribution to the Company’s
          stockholders of the stock of a Related Entity or any other assets).

         

        Notwithstanding
          the foregoing, a Change in Control shall not be deemed to occur solely
          because
          any Person (the "Subject Person") acquired Beneficial Ownership of more
          than the
          permitted amount of the then outstanding shares or Voting Securities as
          a result
          of the acquisition of shares or Voting Securities by the Company which,
          by
          reducing the number of shares or Voting Securities then outstanding, increases
          the proportional number of shares Beneficially Owned by the Subject Persons,
          provided that if a Change in Control would occur (but for the operation
          of this
          sentence) as a result of the acquisition of shares or Voting Securities
          by the
          Company, and after such share acquisition by the Company, the Subject Person
          becomes the Beneficial Owner of any additional shares or Voting Securities
          which
          increases the percentage of the then outstanding shares or Voting Securities
          Beneficially Owned by the Subject Person, then a Change in Control shall
          occur.

        

        5. The
          term
“Special Separation” shall mean any termination of employment that occurs prior
          to the time a Participant is eligible to retire, except a termination for
          cause
          or a voluntary resignation that is not initiated or encouraged by the
          Company.

        

        6. The
          term
“Retirement” shall mean: (a) retirement in accordance with the provisions of any
          appropriate retirement plan of the Company or any of its subsidiaries;
          or (b)
          termination of employment under the permanent disability provision of any
          retirement plan of the Company or any of its subsidiaries.

        

        ARTICLE
          M -- Consent.

        

        Every
          Participant who receives a stock option, stock appreciation right, RSU,
          or grant
          of shares pursuant to the Plan shall be bound by the terms and provisions
          of the
          Plan and of the stock option, stock appreciation right, RSU, or grant of
          shares
          agreement referable thereto, and the acceptance of any stock option, stock
          appreciation right, RSU, or grant of shares pursuant to the Plan shall
          constitute a binding agreement between the Participant and the Company
          and its
          subsidiaries and any successors in interest to any of them. Every Person
          who
          receives a stock option, stock appreciation right, RSU, or grant of shares
          from
          a Participant pursuant to the Plan shall, in addition to such terms and
          conditions as the Committee may require upon such grant, be bound by the
          terms
          and provisions of the Plan and of the stock option, stock appreciation
          right,
          RSU, or grant of shares agreement referable thereto, and the acceptance
          of any
          stock option, stock appreciation right, RSU, or grant of shares by such
          Person
          shall constitute a binding agreement between such Person and the Company
          and its
          subsidiaries and any successors in interest to any of them. The Plan shall
          be
          governed by and construed in accordance with the laws of the State of Ohio,
          United States of America.

        

        ARTICLE
          N - Purchase of Shares or Stock Options.

        

        The
          Committee may authorize any Participant to convert cash compensation otherwise
          payable to such Participant into stock options or shares of Common Stock
          under
          the Plan upon such terms and conditions as the Committee, in its discretion,
          shall determine. Notwithstanding the foregoing, in any such conversion
          the
          shares of Common Stock shall be valued at no less than one hundred percent
          (100%) of their fair market value.

         

        ARTICLE
          O -- Duration of Plan.

        

        The
          Plan
          will terminate on July 10, 2011 unless a different termination date is
          fixed by
          the shareholders or by action of the Board of Directors, but no such termination
          shall affect the prior rights under the Plan of the Company (or any subsidiary)
          or of anyone to whom stock options or stock appreciation rights were granted
          prior thereto or to whom shares or RSUs have been transferred prior to
          such
          termination.

        ADDITIONAL
          INFORMATION

        

         1. Shares
          Awarded as a Portion of Remuneration

        

        Any
          shares of Common Stock of the Company awarded as a portion of a participant's
          remuneration shall be valued at not less than one hundred percent (100%)
          of the
          fair market value of the Company's Common Stock on the date of the award.
          These
          shares may be subject to such conditions or restrictions as the Committee
          may
          determine, including a requirement that the participant remain in the employ
          of
          the Company or one of its subsidiaries for a set period of time, or until
          retirement. Failure to abide by any applicable restriction will result
          in
          forfeiture of the shares.

        

        2. U.S.
          Tax Effects

        

        Incentive
          Stock Options

        

        With
          regard to tax effects which may accrue to the optionee, counsel advises
          that if
          the optionee has continuously been an employee from the time an option
          has been
          granted until at least three months before it is exercised, under existing
          law
          no taxable income results to the optionee from the exercise of an incentive
          stock option at the time of exercise. However, the spread at exercise is
          an
          "adjustment" item for alternative minimum tax purposes.

        

        Any
          gain
          realized on the sale or other disposition of stock acquired on exercise
          of an
          incentive stock option is considered as long-term capital gain for tax
          purposes
          if the stock has been held more than two years after the date the option
          was
          granted and more than one year after the date of exercise of the option.
          If the
          stock is disposed of within one year after exercise, the lesser of any
          gain on
          such disposition or the spread at exercise (i.e., the excess of the fair
          market
          value of the stock on the date of exercise over the option price) is treated
          as
          ordinary income, and any appreciation after the date of exercise is considered
          long-term or short-term capital gain to the optionee depending on the holding
          period prior to sale. However, the spread at exercise (even if greater
          than the
          gain on the disposition) is treated as ordinary income if the disposition
          is one
          on which a loss, if sustained, is not recognized--e.g., a gift, a "wash"
          sale or
          a sale to a related party. The amount of ordinary income recognized by
          the
          optionee is treated as a tax deductible expense to the Company. No other
          amount
          relative to an incentive stock option is a tax deductible expense to the
          Company.

        

        Nonstatutory
          Stock Options

        

        With
          regard to tax effects which may accrue to the optionee, counsel advises
          that
          under existing tax law gain taxable as ordinary income to the optionee
          is deemed
          to be realized at the date of exercise of the option, the gain on each
          share
          being the difference between the market price on the date of exercise and
          the
          option price. This amount is treated as a tax deductible expense to the
          Company
          at the time of the exercise of the option. Any appreciation in the value
          of the
          stock after the date of exercise is considered a long-term or short-term
          capital
          gain to the optionee depending on whether or not the stock was held for
          the
          appropriate holding period prior to sale.

        

        Stock
          Appreciation Rights

        

        With
          regard to tax effects which may accrue to the recipient, counsel advises
          that
          "United States persons," as defined in the Internal Revenue Code of 1986
          (the
          "I.R.C."), must recognize ordinary income as of the date of exercise equal
          to
          the amount paid to the recipient, i.e., the difference between the grant
          price
          and the value of the shares on the date of exercise. 

        

        Shares
          Awarded as a Portion of Remuneration

        

        With
          regard to tax effects which may accrue to the recipient, counsel advises
          that
          "United States persons" as defined in the Internal Revenue Code of 1986
          (the
          "I.R.C."), must recognize ordinary income in the first taxable year in
          which the
          recipient's rights to the stock are transferable or are not subject to
          a
          substantial risk of forfeiture, whichever is applicable. Recipients who
          are
          "United States persons" may also elect to include the income in their tax
          returns for the taxable year in which they receive the shares by filing
          an
          election to do so with the appropriate office of the Internal Revenue Service
          within 30 days of the date the shares are transferred to them.

        

        The
          amount includable in income is the fair market value of the shares as of
          the day
          the shares are transferable or not subject to a substantial risk of forfeiture,
          whichever is applicable; if the recipient has elected to include the income
          in
          the year in which the shares are received, the amount of income includable
          is
          the fair market value of the shares at the time of transfer.

        

        For
          non-United States persons, the time when income is realized, its measurement
          and
          its taxation, will depend on the laws of the particular countries in which
          the
          recipients are residents and/or citizens at the time of transfer or when
          the
          shares are first transferable and not subject to a substantial risk of
          forfeiture, as the case may be. "United States persons" who receive shares
          awarded as a portion of remuneration may also have tax consequences with
          respect
          to the receipt of shares or the expiration of restrictions or substantial
          risk
          of forfeiture on such shares under the laws of the particular country other
          than
          the United States of which such person is a resident or citizen.

        

        Notwithstanding
          the above advice received by the Company, it is each individual recipient's
          responsibility to check with his or her personal tax adviser as to the
          tax
          effects and proper handling of stock options, stock appreciation rights,
          restricted stock units and Common Stock acquired. The above advice relates
          specifically to the U.S. consequences of stock options, stock appreciation
          rights and Common Stock acquired, including the U.S. consequences to "United
          States persons" whether or not resident in the U.S. In addition to U.S.
          tax
          consequences, for all persons who are not U.S. residents, the time when
          income,
          if any, is realized, the measurement of such income and its taxation will
          also
          depend on the laws of the particular country other than the U.S. of which
          such
          persons are resident and/or citizens at the time of grant or the time of
          exercise, as the case may be.

        

        The
          Plan
          is not subject to the qualification requirements of Section 401(a) of the
          I.R.C.

        

        3. Employee
          Retirement Income Security Act of 1974

        

        The
          Plan
          is not subject to the provisions of the Employee Retirement Income Security
          Act
          of 1974 ("ERISA"), as amended.

        

        4. Incorporation
          of Certain Documents by Reference

        

        The
          following documents filed by the Company with the Securities and Exchange
          Commission (File No. 1-434) pursuant to the 1934 Act are incorporated into
          this
          document by reference:

        

        1. The
          Company's Annual Report on Form 10-K for the most recent fiscal year ended
          June
          30;

        2. The
          Company's Quarterly Report on Form 10-Q for the most recent quarter(s);
          and

        3. All
          other
          documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
          15(d) of
          the 1934 Act after the date of this Prospectus and prior to the filing
          of a
          post-effective amendment which indicates that all securities offered have
          been
          sold or which deregisters all securities then remaining unsold.

        

        The
          Company will provide without charge to each participant in the Plan, upon
          oral
          or written request, a copy of any or all of these documents other than
          exhibits
          to such documents, unless such exhibits are specifically incorporated by
          reference into such documents. In addition, the Company will provide without
          charge to such participants a copy of the Company's most recent annual
          report to
          shareholders, proxy statement, and other communications distributed generally
          to
          security holders of the Company. Requests for such copies should be directed
          to
          Mr. Jay A. Ernst, Manager, Shareholder Services, The Procter & Gamble
          Company, P.O. Box 5572, Cincinnati, Ohio 45201,
          (513) 983-3413.

        

        5. Additional
          Information

        

        Additional
          information about the Plan and its administrators may be obtained from
          Mr. E.J.
          Wunsch, Assistant Secretary, The Procter & Gamble Company, One Procter &
Gamble Plaza, Cincinnati, Ohio 45202, (513) 983-4370.

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        

        2001
          stock plan.doc

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